Democrats to automakers: Prove you can repay $25 billion
Democratic leaders in Congress called on Detroit's automakers Friday to submit "credible" financial plans to lawmakers by Dec. 2 for spending up to $25 billion in government money, including vows for "significant sacrifices" by top executives.
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A letter from House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., came just hours before the Wall Street Journal reported on its Web site that General Motors Corp.'s board of directors had put an eventual bankruptcy filing into its range of options.
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The Journal, citing unnamed sources, said the board was willing to consider "all options" for GM, which has said it could be near the minimum amount of cash it needs to operate by the end of the year. The story said the board's position on a potential filing put it in "rare disagreement with Chairman and Chief Executive Rick Wagoner."
Wagoner had told Congress this week that bankruptcy is not practical for the company because people wouldn't buy vehicles from a bankrupt company.
"I am very optimistic and hopeful that they have gotten the message that they just can't come and say, 'Give us this,' " Pelosi said Friday. "How do we tell the American taxpayer it was worthwhile to put this in not as a life support for a few more months and then they are back again, but as an investment in their viability?"
According to the letter, automakers will have to explain their financial position, how they plan to spend the money and the assumptions behind their assurances that any loan will be paid back. General Motors Corp., Ford Motor Co. and Chrysler LLC consumed nearly $18 billion in cash last quarter, and analysts have said GM and Chrysler could run short of cash by the end of the year.
The terms for any loan are to mirror the conditions set in a draft bill released by Rep. Barney Frank, D-Mass., earlier this week. Among them: The government debt takes precedence among the company's other loans; automakers have to provide warrants or stock to the government, and if the automaker's plan appears off track, the government can call its loan back immediately. Automakers also must promise to meet the fuel economy standards set in last year's energy bill.
And Congress promises to limit executive pay, bonuses and other benefits of top executives, who were roundly criticized after flying corporate jets to two days of hearings this week and providing what many lawmakers called stilted, incomplete answers.
Reid and Pelosi shut down a last-minute attempt at a compromise rescue Thursday, saying there were not enough votes in either side of Congress to pass a bill backed by Michigan's Democratic senators and key Republicans. That bill would have taken $25 billion in loans for building more efficient vehicles that Congress approved in September and lent it to the automakers immediately, an approach backed by the Bush administration.
Pelosi again suggested Friday that the Bush administration had the power to help the industry without Congress acting by using money from the $700-billion financial industry bailout. She also suggested that the automakers' finance arms could have access to an additional $25 billion under that program. And she promised not to use the $25 billion approved for retooling plants as a short-term lifesaver for the industry.
"It is like taking your kids' college education fund and spending it on your credit card bills," she said.
All Detroit automakers have committed to sharing their plans with Congress, but were seeking more guidance about how much detail they would need to share.
It was still not clear Friday whether lawmakers would question the basic business assumptions made by the automakers -- who have said they don't expect U.S. sales to rebound until 2010 at the earliest. Several analysts have warned that without steep cuts, Detroit automakers would continue burning through cash even when the economy revived.
Pelosi made clear Friday that she wanted proof the automakers were making progress on building fuel-efficient models, not just slashing costs to survive the roughest period in their history and using taxpayer dollars to bail water from a sinking boat.
"Their viability is not just about tightening the belt, which is important; it is about a decision to compete and to innovate," she said, adding, "The behavior of the past generation in terms of Detroit has not produced the preeminence that we would like to see."
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GM, which has said it could be near the minimum amount of cash it needs to operate by the end of the year.
Idle threats my friends, I could probably name 100 ways for them to save money immediately and I don't even work there. I am betting you could as well.
Wagoner had told Congress this week that bankruptcy is not practical for the company because people wouldn't buy vehicles from a bankrupt company.
Uh hello dumb ass...no one is buying your vehicles because you laid them all off, no one has a job to buy your crappy line of junk and the ones that do have jobs are now so overburdened by taxation they won't be buying anything for a decade either...what a tool.
"I am very optimistic and hopeful that they have gotten the message that they just can't come and say, 'Give us this,' " Pelosi said Friday. "How do we tell the American taxpayer it was worthwhile to put this in not as a life support for a few more months and then they are back again, but as an investment in their viability?"
Wake up call Nancy Pelosi, your head is in the sand...you just gave 700 billion to the investment industry...these jackasses are only asking for 25 billion and you make them do the whole dog and pony show...where the hell was your smart mouth when the finance industry asked and received without question? Getting your hair done or something...what a tool.
provide warrants or stock to the government,
How about make the executives give the taxpayer their Class A stock option packages? That worthless public stock the government wants is just that...worthless.
Automakers also must promise to meet the fuel economy standards set in last year's energy bill.
Puleeze! There has been mpg legislation for decades. The automotive industry just ignores it. Period.
And Congress promises to limit executive pay, bonuses and other benefits of top executives, who were roundly criticized after flying corporate jets to two days of hearings this week
If this isn't the pot calling the kettle black I don't know what is. Congressmen and Senators get so many perks for their "public service" it isn't even funny...the fact the the auto execs flew their jets in just shows how out of touch with the reality of regular people they are.
Pelosi again suggested Friday that the Bush administration had the power to help the industry without Congress acting by using money from the $700-billion financial industry bailout.
Jesus Christ! Why is everyone throwing around our money like this? I don't want to bail out the finance industry OR the automotive industry and Nancy here is saying why didn't you ask Daddy first?
All Detroit automakers have committed to sharing their plans with Congress, but were seeking more guidance about how much detail they would need to share.
This is just a smoke screen. They don't want to be answerable at all to the Government. By asking for more detail from the government you might as well throw the whole request into legislation hell.
It will take the government a decade for them to decide they want the reports in 10 pt font and not 12, let alone what content they want.
It was still not clear Friday whether lawmakers would question the basic business assumptions made by the automakers -- who have said they don't expect U.S. sales to rebound until 2010 at the earliest. Several analysts have warned that without steep cuts, Detroit automakers would continue burning through cash even when the economy revived.
If they are "burning through cash" shouldn't they then fail? I mean if you or I "burn through cash" and don't pay our bills what happens?
Everyone is terrified of the auto industry failing, I say let it fail. Yes it would be a bitter pill to swallow but it would put us on the road to recovery quicker than having it happen anyway over the next two decades in chunks of 25 million a pop.
I guarantee you this...this will NOT be the last time the auto industry asks for money if you give it to them now and I would say the same for the financial infrastructure institutions...shit they are already saying the financial institutions will need more than the 700 million and they haven't even received on it yet.
"Their viability is not just about tightening the belt, which is important; it is about a decision to compete and to innovate," she said, adding, "The behavior of the past generation in terms of Detroit has not produced the preeminence that we would like to see."
Again..then let them fail.
Business 101 says if they cannot compete and fail to innovate then they fail.
Welcome To Detroit
