Frank Sees "Disaster" If Auto Industry Fails
Friday 05 December 2008
by: David Stout | The New York Times

House Financial Services Committee Chairman Rep. Barney Frank (D-Massachusetts) pressed for action on the auto bailout Friday. November's figures showed a loss of more than half a million jobs nationwide. (Photo: Susan Walsh / AP)
Washington - The chief executives of the Big Three automakers returned to Capitol Hill on Friday, hoping to convince House members already stunned by the latest national unemployment figures that they are prepared, at last, to make the changes necessary for their companies to survive.
"I hope we will do something," said Representative Barney Frank, the Massachusetts Democrat who heads the Financial Services Committee, shortly after the November employment report was released showing the biggest job losses in more than three decades.
Not to do something, with the November figures showing a loss of more than half a million jobs nationwide, would be "a disaster," Mr. Frank warned, expressing concerns that dominated much of the session.
As the hearing unfolded, there seemed to be a growing feeling that something had to be done to save the Detroit companies, but persistent differences on where the money should come from, and that any availability of federal money would be linked to strict supervision. There was some sentiment for tapping into the $700 billion banking bailout, known as the Troubled Asset Relief Program, or TARP, that was enacted by Congress in September in an effort to counter the growing financial crisis.
But President Bush opposes using any of that TARP money to aid the automakers. He has called instead for redirecting $25 billion already allocated for the companies to retool to make their vehicles more fuel-efficient. But the automakers say that amount will not be enough for them, and the president indicated no change in his stance on Friday.
"I am concerned about the viability of the automobile companies," Mr. Bush said. "And likewise, I am concerned about taxpayer money being provided to those companies that may not survive."
The auto executives, who have encountered skepticism and even hostility in their appearances at the Capitol, may have heard a glimmer of hope in the words of the panel's leading Republican, Representative Spencer Bachus of Alabama, who said he could go along with "limited transitional assistance" for the embattled General Motors, Ford and Chrysler.
"What we need is a solution, not a first installment," Mr. Bachus said, emphasizing that he needed to be persuaded that the car companies had a decent chance of making it.
Mr. Bachus's stance seemed less firm than that of his fellow Alabama Republican, Senator Richard C. Shelby, who reiterated his opposition at Thursday's hearing of the Senate Banking Committee to any bailout of the carmakers, whose problems he said were of their own making.
The auto chiefs were subjected to lectures all morning, even though they had inherited some of the problems from the executives of a previous era, when Detroit ruled the automobile world, buyers seemed to want big cars and gasoline was cheap.
Rick Wagoner, the chairman of General Motors, noted that G.M. was celebrating its centennial this year and looking back to its "many successes."
"We also have learned from the mistakes we have made," Mr. Wagoner said.
He predicted that any taxpayer money his company borrowed could be repaid by the end of 2012.
And what if even one of the Big Three failed, one committee member asked. Could there be a chain reaction that would also topple the other two automakers, sending repercussions throughout the economy as various supplier companies for Detroit also collapsed?
The collective answer of the auto executives and the auto union leader was yes. Besides Mr. Wagoner, those testifying included Robert L. Nardelli and Alan R. Mulally, the heads of Chrysler and Ford, respectively, and Ron Gettelfinger, head of the United Automobile Workers, which is now prepared to make sacrifices that would have been unthinkable for the membership not many years ago.
Even those House committee members who hinted on Friday that they might consider some kind of lifeline for the auto companies had harsh words for the chief executives.
"The condition of the auto industry is one of your making," said Representative Gary Ackerman, a New York Democrat. He said he was disturbed that the executives' first "seat of the pants" estimate concluded that they needed about $25 billion in aid to stay afloat. But now, he noted, they say they need $34 billion.
Representative Peter King, Republican of New York, said he might support some assistance ("I'm not saying I won't"), provided he is convinced that it has "a reasonable chance of working."
Mr. Nardelli acknowledged that the companies were seeking "a significant amount of public money," but he told the lawmakers that making it available would be "the least costly alternative."
He asserted that his company had become a forward-looking enterprise and would probably have hundreds of thousands of electric cars on the road a half-decade from now.
Representative Paul E. Kanjorski, Democrat of Pennsylvania, reflected the political anguish that lawmakers are feeling, given the public's hostility toward a bailout, as reflected in opinion polls, and the stark new unemployment figures.
If Congress provides assistance to the car companies, Mr. Kanjorski said, he can already hear his constituents, especially those with hard-pressed businesses of their own, saying: "Well, if you gave the auto companies all that money, why can't you take care of me?"
Representative Carolyn McCarthy, a Democrat from Long Island, said the auto executives' pleas had been too full of complicated language and numbers and too devoid of plain English. "You've got to learn to speak to the American people," she said. "This is a political situation here."
Some lawmakers seemed to be venting years of pent-up resentment toward the auto companies based on a perception that, when they were riding high, the companies did not hesitate to flex their political muscle, in fighting stricter fuel-efficiency and anti-pollution standards, for instance.
Representative Carolyn Maloney, Democrat of New York, alluded to that history of resentment. If Congress does come to the aid of the companies, she asked the executives rhetorically, "Are you going to use this money to sue us?"



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ARE YOU GOING TO SUE US? The
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Sat, 12/06/2008 - 00:50 β Margaret Morris (not verified)So what am I missing here?
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Sat, 12/06/2008 - 01:53 β All the king's horses (not verified)Re: Margaret Morris comment.
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Sat, 12/06/2008 - 08:20 β Anonymous (not verified)I see disaster if the car
Sat, 12/06/2008 - 17:04 β radline9 (not verified)Gifts of automobile
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Sun, 12/07/2008 - 00:35 β omallj (not verified)