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Frank Sees "Disaster" If Auto Industry Fails

by: David Stout  |  The New York Times

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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

ARE YOU GOING TO SUE US? The hubris of our grand Representatives in Congress is beyond belief. Sure, the Big Three are rude, crude, and wasteful - But what in the hell do we call the 535 members of Congress, many of them long-term incumbents, who have spent all our money, and most of our hopes on themselves and their wealthy friends. Single-payer Health Care? they have it. Government subsidies for both travel and housing? That too is part of the perks of 'serving the People. Flights on private jets owned by US and foreign corporations? Oops! That is one of the things that might get a finger slapped, and might not, depending on the seniority and excuses offered by our servants. Of course, this all pales beside the rip-offs on the part of the auto workers. Those Bastards! They actually expect to earn a living wage, rather then starving on what WalMart pays, and health insurance, and seniority and a company pension. You know all the bennies that we used to brag about, as Americans, up until we elected that friendly, grandfather, Ronald Reagan, who embarked the Ship of State on its latest excursion to the shoals of greed and usury. This whole problem makes me sick. Billions and Billions for thieving bankers and con-men, but not a dime to the Working Class unless they sign over their first born, AND donate a couple of pints of blood. Where is Huey Long, when we need a real Populist to lead the people. "EVERY MAN A KING' does have a nice ring to it, doesn't it? Or maybe "A fair days pay for a fair days work" We could even try out some really old fashioned stuff like 'All for one, and one for all'; or Up The Revolution! and Off With Their Heads! Certainly Congress, the Courts, and perhaps 90 percent of the Bureaucracy, would benefit the country if they just retired en masse.

I listened to Ralph Nader

I listened to Ralph Nader today on Democracy Now!, another good alternative medium. He is particularly knowledgeable about the auto industry as many might remember ("Unsafe at Any Speed") Nader made a number of really good suggestions in a limited endorsement of taxpayer rescue of the auto industry, among them that the amount needed was much less, that the board(s?) of directors be fired and that brilliant engineers in secondary tiers of management be given their head to try innovative stuff. He also insisted on tighter oversight and it sounded like continuing partial ownership in the public domain when the investment begins to pay off. Other knowledgeable people Michael Moore, James Kunstler, et al. are suggesting that the industry turn to manufacture of rolling stock so that our sad railroads be brought up to snuff with of course the energy savings and environmental benefits that would entail. I feel more sanguine about this bailout than the earlier one of the financial sphere which appears to be a. not working and b. not given adequate oversight.

So what am I missing here?

So what am I missing here? Shelby opposes bailout of the Big 3 because their problems are their own making? Of course they are. But isn't this a bit duplicitous on his part? Weren't the problems of Citibank, Goldman Sachs, and all the Wall Street banks we're handing fortunes to just as guilty of making their own problems? Duh. I guess W isn't in the auto manufacturing business and doesn't see it's connection to ... OIL. Duh. I like the way the first commentator thinks. Off With Their Heads! The lot of them. Corporate "leaders". Political "leaders". Off with Their Heads!!!!!!!!!!!!!!

It is true that as the

It is true that as the Alabama Congressman points out, this is a problem of their own making. The Big 3 automakers are the "denial" automakers. From denying global warming to the changes in consumer trends (more fuel efficient vehicles) to the lagging quality, they have shown the foresight of drunken men. Unfortunately, their bankruptcy would damage so many innocent people with it as well. To begin with, any money given to them will be squandered by the management. It has to go. If money is given, they'll be back next year for more - a bottomless pit. We need to change them fundamentally. Buy them. Turn them around by launching green initiatives and transportation. I fully realize the scope of the challenge and that it will take years for this to happen. Furthermore, the quality needs to be made up both real and perceived. Privately, I just wish that Congress had been so skeptical with the banking industry.

and all the kings men are

and all the kings men are not going to put Motor City back together again, no matter how many phony paper dollars they throw at it. Let's face facts here, folks: the American Dream has turned into a nightmare and it has to play out before we can wake up. A debt-based economy is great for a while -- and we have had one hell of a run -- but when it implodes it is called a "depression." Rome is burning and our "leaders" and our "elected representatives" are fiddling like mad. All to no avail. This tornado has a mind of its own and it is not about to be turned around by a bunch of cheap crooks ginning up fake paper. Our "elected " representatives should really be our "ejected" representatives -- revolution is written into our constitution and is, in fact, our duty when government fails us. Whether you call it "corporatocracy" "fascism" or "oligarchy" we need to bring it down and start over. Anything else is just rearranging the deck chairs on the proverbial Titanic. This we owe to our Founding Fathers and Mothers who pledged their honor, their fortunes and their very lives to throw off the king's rule and found this nation. We have to do the same or surrender to tyranny. It's our call now.

Re: Margaret Morris comment.

Re: Margaret Morris comment. Ralph Nader, particularly knowledgeable about the auto industry? Give me a break! Nader is a jerk! His book killed the most innovative automobile introduced by the American auto industry in over 50 years and created a fear of innovation that persisted throughout the 60s, 70s, and 80s. If not for Nader, the US auto industry might have been much more competitive over the last 40 years. Several principles, I think, should apply: (1) Lawyers should not run auto companies. (Actually, that's a special case: Lawyers should not run companies, in general.) (2) Congress should not run auto companies. What makes anyone think they can do it better than auto executives? (3) Market forces should apply. (Absent the current disaster in financial markets that has created an extreme economic downturn in which special assistance is definitely necessary.) (4) If Congress wants to influence market forces to favor greater fuel economy and green energy, how about higher taxes on fossil fuels? A $3 per gallon (or hgiher) tax on gasoline would exert a much stronger influence on vehicle design and product mix than anything proposed so far, and I would be a lot more confident in US auto company management's ability to deal with that than any directives from Congress. (If we require US companies to shift their designs and manufacturing mix toward fuel efficient vehicles and the price of gasoline stays low, who is going to buy them? This is a cure worse than the disease!)

All the king's horses:

All the king's horses: You're throwing out the baby with the bathwater. Consider how many revolutions have created any system that has served better than ours for over 200 years. Let's get real, stop ranting and raving, and just solve the problems.

Very well said xntrk, I

Very well said xntrk, I would add it would be a world where NSCAR races Kias against Hyundis, a world without Ford trucks, Chevy Impalas and Corvetts. No more Chrysler vans for the kiddies. Me, I love my Ford truck, have it 22 years. In fact here on the farm I still have a 53 Ford ton and a half farm truck, Jubilee year for them, it says so on the horn button. Hate to see this world where these things no longer exist, hauling goods to market with a Kia, not a Ford.20x102.2

I see disaster if the car

I see disaster if the car companies get bailed out. Let Chrysler fail, they make shit for cars. Do they have even one hybrid? Dodge Ram trucks and Jeeps all have the worst gas milage, safety standards, and repair records. They were already bailed out once and they continued making shit.

Gifts of automobile

Gifts of automobile industries to the US: 1. Dependency on oil(most public transportation in cities where dismantled after WWII) 2. Air, noise, light and other environmental pollutions. 3. Urban sprawl These big three gifts in turn created a host of social, economic problems that continue to plague this country. The automobile industries are the problem. Our new 21st Century American dream should be: 1. live within our means. 2. consume less, own less and create more. 3. Use public transportation. 4. Save our resources for future generations.

Failed government -- failed

Failed government -- failed industry--failed people.

The middle class are

The middle class are protesting in Ice Land. How long will it take in the United States for the people to get fed up? I agree with Xntrk, the sheeple are complacent until they start getting hungry and homeless. Then what will happen? I see a software worker that lives in Florida helping homeless people by placing them in abandonded and foreclosed homes that are were being vandalized. The Florida authorities are doing nothing about it. Not a bad idea!!?? Maybe we will all end up in abandoned buildings.