Big 3 plead for aid, get no traction
Chief executives of the nation’s once-mighty Big Three automakers came to Capitol Hill on Tuesday to plead for $25 billion in federal aid, but the idea of bailing out Detroit has run into a wall of skepticism from a broad cross-section of lawmakers concerned about the environment, unions and Japanese auto plants in their home states.
President Bush opposes providing emergency funds to Detroit automakers, though President-elect Barack Obama has called for aiding the U.S. industry. A vote on the issue could come as soon as today.
Some lawmakers see a bailout through the prism of constituents who work in the auto industry -- but not for General Motors, Ford or Chrysler.
“I’m sure that I’m going to be asked, ‘Congressman, I work at Honda’ or ‘I work at Mercedes. I get $40 an hour,’ ” said Rep. Spencer Bachus (R-Ala.). “ ‘Why are you going to take my tax dollars and pay it to a company that’s paying their employees $75 an hour?’ ”
Others, like Sen. Jim Bunning (R-Ky.), oppose federal aid on ideological grounds. Although Kentucky is the third-largest producer of automobiles in the U.S. after Michigan and Ohio, with two Ford plants and a GM facility, Bunning thinks a Big Three bailout would be a mistake -- just as he thought last month’s $700-billion Wall Street bailout was socialism.
“I know Detroit’s pain is felt in the towns and cities all across Kentucky,” said Bunning, whose state is also home to a Toyota assembly plant, but “simply throwing money at the problem is not the answer.”
Many also contend that U.S. companies bear a lot of the blame for their problems.
“I am not going to turn my back on the working men and women of America,” said Rep. Joe L. Barton (R-Texas), who is so proud of the GM plant in his district that he drives a Chevy Tahoe that was produced there. “However, throwing billions of taxpayer dollars at an ailing industry won’t necessarily cure the problem.”
Such views are especially frustrating for Rick Wagoner of General Motors Corp., Alan Mulally of Ford Motor Co. and Robert Nardelli of Chrysler. The three CEOs, who appeared before the Senate Banking Committee on Tuesday, said the nation’s economic crisis threatened their companies’ survival just as they were finally adapting to the global marketplace with leaner operations and more fuel-efficient vehicles.
Wagoner told lawmakers that a refusal to act would further imperil the already battered economy.
“This is all about a lot more than just Detroit,” Wagoner declared. “It’s about saving the U.S. economy from a catastrophic collapse.”
Alan Reuther, legislative director for the United Auto Workers, rejected the idea -- voiced by more than a few members of the House and Senate -- that overly generous union wages and benefits contributed to Detroit’s woes.
“We are obviously opposed to any more concessions being required of workers and retirees,” Reuther said. “UAW members already made huge sacrifices in the 2005 and 2007 contracts. The last contracts have been called ‘transformational.’ They effectively eliminated the cost gap between the Big Three and the foreign transplants in terms of labor costs.
“Wages for new employees were slashed 50%; new employees do not get any guaranteed retiree health benefits; they also do not get the traditional defined-benefit pension plan,” he said. “And the healthcare liabilities for existing retirees will be transferred to an independent [entity]. Bottom line: The workers and retirees have already accepted major cuts.”
Time was when Detroit and the UAW had so much clout that working their will on Congress was relatively easy. They fended off tougher vehicle fuel-economy rules for years, for instance.
“The kind of muscle that used to be applied by the unions and these revered corporations just isn’t there anymore,” said Ross Baker, a political science professor at Rutgers University.
Many Democrats want to preserve the jobs of union members, an important constituency. But they also want to respond to another important constituency: environmentalists who think aid should be conditioned on Detroit’s stepping up its commitment to build cleaner, more fuel-efficient vehicles.
“What we need is for the Big Three to become part of the solution for energy security and fighting global warming rather than being part of the problem,” Sen. Robert Menendez (D-N.J.) said.
Not only do environmentalists have more leverage, but the debate over aid to U.S. automakers has also become a proxy battle over the role of unions in U.S. businesses, said Gary N. Chaison, a labor relations professor at Clark University in Worcester, Mass.
The collapse of one or more of the automakers could further damage the U.S. labor movement, costing it thousands of union jobs and tarring it as a drag on companies’ ability to compete in the global economy, Chaison said.
“I think it would reaffirm in the public’s minds that unionization leads to bankruptcy, and that’s a powerful message,” he said.
Troy A. Clarke, president of GM’s North American operations, said in an interview Tuesday that many people didn’t realize how much the industry had changed.
“People are carrying around with them an image of our industry from the 1970s,” he said.
As evidence of the industry’s new face, Clarke pointed to the landmark union contract in 2007 that would significantly reduce labor and retiree costs, as well as the forthcoming Chevrolet Volt, an electric car with a backup gasoline-powered generator. The company says the Volt should travel 40 miles on a single charge.
“This is a dynamic industry that is well on its way to becoming a very lean competitor that’s going to compete on the basis of advanced technology,” Clarke said.
GM chief Wagoner told the Senate panel that products weren’t the company’s problem.
“What exposes us to failure now is not our product lineup, is not our business plan, is not our employees and their willingness to work hard, is not our long-term strategy,” Wagoner said. “What exposes us to failure now is the global financial crisis, which has severely restricted credit availability and reduced industry sales to the lowest per-capita level since World War II.”
He added: “Our industry, which represents America’s real economy, Main Street, needs a bridge to span the financial chasm that is open before us.”
As the auto industry executives were testifying, auto dealers from around the country were flying into Washington to lobby for the $25-billion package.
“We’re trying to put a Main Street face on this issue,” said Bailey Wood of the National Automobile Dealers Assn., which expects 700 auto dealers to go out of business this year. Many customers won’t buy vehicles from a dealer if the manufacturer is in bankruptcy, the group has warned.
But lawmakers such as Sen. Roger Wicker (R-Miss.), whose state is home to Nissan and Toyota plants, appeared yet to be convinced.
“To provide a $25-billion bailout for some companies isn’t fair to taxpayers or the American businesses that have made smart decisions,” he said, “nor is it good government policy.”