Senate Skeptical As UAW Pledges Concessions

Dec. 3, 2008— -- Despite concessions from autoworkers to delay billions in payments to their health care fund for retirees and make changes to its job bank, the auto industry bailout faces an uphill battle in Congress.

The CEOs of automakers General Motors Corp., Chrysler LLC and Ford Motor Co. arrived in Washington for hearings Thursday, hoping to convince Congress to pass their $34 billion plan to prevent bankruptcy for their companies and potential long-term consequences to the economy.

Under enormous pressure to help the Big Three get through an economic crisis, United Auto Workers President Ron Gettelfinger agreed Wednesday to make major cuts in labor costs.

"The big three automakers will be saving well in excess of $10 to $12 billion by the deferred payments to the health care trust fund," said Harley Shaiken, professor of labor at the University of Berkeley. "That is enormously significant."

But, the union's concessions alone have not been enough to convince Congress that Detroit automakers, who are now burning through $5 billion a month, should receive a bailout.

Senate Majority Leader Harry Reid, D-Nev., said that he doesn't have the votes to divert some of the $700 billion in the previously approved Troubled Asset Relief Program, or TARP, financial rescue funds to save U.S. automakers.

Reid spokesman Jim Manley reiterated the ability of the Bush administration to step in and prevent the Big Three from collapsing.

"As we have said all along, the Treasury already has the authority and resources to protect thousands of Americans who work in our nation's struggling auto industry," said Manley. "If the administration continues to oppose using TARP funds to address this crisis, we will continue trying to find an alternate solution."

The leading bailout proposal in the Senate, however, would not use TARP funds, but instead rely upon $25 billion in loans Congress has already approved for the development of fuel-efficient vehicles. While this bill may have enough votes to pass in the Senate, it will likely run into trouble in the House, where House Leader Nancy Pelosi, D-Calif., is opposed to using the money for anything but the development of fuel-efficient technology.

Industry leaders were hoping that union concessions would appease Congress to allocate funding for urgent loans, since many have expressed disapproval at the union's benefits compared to those of U.S.-based workers for foreign auto companies.

At a midday press conference, Gettelfinger said the union will modify the jobs bank, in which laid-off workers are paid up to 95 percent of their salaries while not working -- but he did not give specifics.

"We're going to sit down and work out the mechanics," Gettelfinger said after meeting with local union officials. "We're a little unclear on some of the issues."

The current crisis in the auto industry is part of a much larger problem, he said.

"Are we going to blame the auto workers who are, by the way, 10 percent the cost of an automobile?" Gettelfinger asked. "Or are we going take a look at what's happening to our economy, to the housing crunch, to the Wall Street bailouts and the failures of Wall Street?"

White House spokesman Dana Perino and President-elect Barack Obama also fielded questions about the proposals of the big three automakers this morning.

"We just got the summaries of those plans yesterday," Perino said. "And officials here are pouring over them as they are at the Treasury Department and the Commerce Department. There's a lot that goes into this and a lot is at stake when we're talking about possibly putting taxpayer dollars towards any of these companies."

"We'll have to wait and see what their plans say. Give us a chance to look through them and see what they have to say tomorrow. And let's see what kind of support they can get on Capitol Hill tomorrow as well. I think that remains a little bit of a mystery."

When asked if the White House was ruling out more than $25 billion for the automakers, Perino responded, "I'm not ruling anything out. I think that we need to see their plans."

At a news conference this morning to unveil his pick for Commerce Secretary, Obama said, "It appears, based on reports that we've seen, that this time the executives from these automakers are putting forward a more serious set of plans."

Earlier this morning, General Motors president and chief operating officer Fritz Henderson said bankruptcy is not an option for his company while denying criticism that federal aid would be a reward for the company's failure.

"In order to run a bankruptcy, you still need cash and, second, the most important thing actually from our perspective, we need to sell cars and trucks one at a time to consumers," Henderson said on "Good Morning America. "We want [consumers] to be confident in their ability to buy our cars and trucks and don't want to give them a reason not to buy them."

GM, which is in the worst shape of the Big Three automakers, said it needs $4 billion to stay afloat through year's end.

"We made that request because that's what's needed for us to continue to finance our business," said Henderson, who became president of the company in March. "We wouldn't have asked for it if we didn't need it and, obviously, if it's not received, our report shows we fall below the minimum cash we need to run the business."

Henderson added that the company needs additional funds in case things get worse.

"We think we need $12 billion in order to make it through this difficult situation but if it gets significantly worse ... we asked for a $6 billion revolving line of credit to try to address that potential contingency."

Henderson said the company's cash troubles aren't merely the result of the recent credit crunch. GM has lost sizable market share in the last 10 years and the auto industry has been cited for fighting efficiency and environmental standards.

"We've had lots of challenges through our corporate history," Henderson said. "For example, if you looked at where the company stood and where our industry stood on a global basis in the U.S. and flash forward to where it stands in the third or fourth quarter of 2008, it's astonishing — both the size of the decline and the savagery of the speed of the decline. I would say not simply in the auto industry but in many other industries and that part of it, the last 12 months, if you will, or 14 months has really been a function of credit crisis, a crisis in consumer confidence and I'll call it very difficult economic circumstances."