Senate Auto Hearing: “Russian Roulette with the Economy”
The auto execs are before Senate Banking today–go here for the hearing.
Dodd is up, arguing that not helping the Big Two and a Half is like playing Russian Roulette with the American economy. He’s also beating up on Paulson for his irresponsibility with our TARP funds.
In my view of we’re going to insist on reforms from the auto industry, we ought to also require reforms from the finance industry.
Also note, they’ve got representatives from both the suppliers (the head of Johnson Controls) and the dealers (the President of CT’s auto dealers). The House hearing last time had such representatives, and it really made the hearings more valuable for the executives.
Shelby up. Took him 2.6 seconds to talk about labor.
Gene Dadaro, from the GAO, up. He’s talking about what past bailouts have involved. I’m curious whether he was consulted on TARP? He’s also demanding a board with real oversight. Again. Was he consulted on TARP?
Dick Shelby seems to believe he’s an expert on the auto industry. Still pressing for bankruptcy.
Dadaro states clearly that he believes Treasury has the ability to intervene. Shelby’s pushing to get Treasury to do this.
Bob Bennett has an interesting idea: you give TARP money to the auto companies’ creditors, in exchange for equity in the auto companies. That would change the cash shortage of the auto companies, while watering down stock.
Jack Reed, clarifies that we should expect concessions from suppliers and dealers as well as the UAW. Finally! Someone who notices that the Big 2.5 have contracts with more than just the UAW!
Schumer: UAW made concessions yesterday, but where are the dealers? Where are the bondholders?
Menendez suggests requiring a dollar for dollar concession from stake-holders in any bailout. Also raising the possibility that a bailout includes prohibitions on a foreign maker buyout of Chrysler.
Evan Bayh, as the first auto state Senator up: Isn’t it true that there’s too much uncertainty to allow these companies to go bankrupt right now?
Sherrod Brown, on differences between 1979 and now: UAW already made concessions, the Big 2.5 have already restructured significantly.
James Fleming: The ripple on effect is a tsunami on the dealers who employ people in your home states. If you do not pass this bill, the effect on your consitutents will be enormous. Consider the human side on what’s going on–go into those dealerships. It’s tough work, they’re writing the paychecks out, they do not have massive staffs. They’re making about 50,000 a year working in a dealership–that will go away.
[Halleluyah–it is high time we got dealers in here to talk about this.]
Keith Wandell: Largest supplier of automotive batteries to aftermarket and equipment manufacturer, 7th largest in world, and 3rd largest in North America. Had we not saved Plastex and bridged this to avoid liquidation, all 52 assembly plants Plastex supplies would have been affected for some period of time.
I can assure you that even though every foreign car maker that assembles cars in North America, they too are deeply concerned about the viability of the supply base in North America.
Mark Zandi (from Moody’s): 1) Govt should provide help. Without help, they’ll be in bankruptcy. If auto makers file anytime in the next few weeks, it’ll be badly damaging to the economy. 2) $34 billion will not be sufficient. It would need between $75 billion to $125 billion, light vehicle will be 11 million in 2009. 17 million not supportable by underlying demand. 3) If plans fully executed, could result in viable industry. Have already made significant strides. Labor costs have declined during this decade. UAW concessions, further cost savings. 4) Recommend Congress provides aid, in exchange for warrants and restrictions on exec comps. Aid in two tranches. Reasonable concern that bankruptcy would preclude people from buying cars, but also need reassurances that warranties would be honored. Automakers have reasonable plan to restructure their businesses.
[This guy better be careful, or he’s going to be put in charge of the oversight board.]
Mark Zandi may have finally gotten through to Shelby that the government is going to have to pay this anyway.
Crapo asks whether Oversight Board needs authority to impose restructuring conditions "as a Chapter 11 court could." Would having an oversight trustee affect confidence?
Wagoner: If people saw funding coming, we would have to present a plan to convince people we could execute it.
Nardelli says everyone’s business was 20% leasing–and leasing has been all but shut down by credit crunch.
Gettelfinger says, yeah, put someone in charge of the bailout. But make sure you’re addressing health care and unfair trade.
Crikey. Senator Corker just revealed that DOE rejected all the applications for energy retooling projects. The car companies had not been informed.
Casey: "And then we heard this garbage about this $73 an hour? That’s a totally lie, a lie that was deliberately propagated."
Nardelli: Just in the last week, 240 dealers quit, another 250 about to, because they can’t get credit.
Zandi says a bailout would be worth 1.50 in economic stimulus (with $1.80 being investment in infrastructure, $1.10 to rebates).
Dodd asks another great question: should Congress pre-empt state-level franchise laws, making it easier to reduce dealers. The dealer guy hates it, not surprisingly.
Paul Krugman used that phrase in referring to Paulson’s refusal to bail out Lehman Brothers.
Hey, thanks for the link and the live blogging. Your link works for me.
Boy I hope those accountability mechanisms really do get set up…
And if Dodd has his way, he’s going to use the Big 2.5 beg to add transparency for TARP. That’d be a t’ing of beauty.
Funny, I thought TARP was supposed to have that built in. What’s up w/that? Hmmm… maybe it is transparent, it’s just they won’t let anyone see it.
As I understand it, Hank thinks letting us see might embarrass those guys. Almost sounds like AA anonymity… “the spiritual foundation of our recovery” as The Big Book says.
Gee, ‘ya think?
Yes but Mr. Shelby, the GAO HAS defense industry analysts.
Crapo at least got the bankruptcy point in there…
Not one, Treasury needs another or two to oversee Treasury.
Does it strike anyone as odd that Dadaro looks like he could be Dodd’s cousin?
Now that you point that out…the eyebrows…
Dole, get your staff to do some work. I’ll forward some posts about bankruptcy and China….you know, national security…Read the auto industry reports too.
TARP…needs integrity…conditionality… I guess our nasty grams about making sure the financial industry has the same “to do” list as the 2.5 has gotten through.
One cannot help but suspect that ‘aspects’ of consanquinity are at ‘play’ in all of what has transpired, in politics, in ‘economics’, and in the indubitably honest and insightful pronouncements of the M$M over the last few decades …
To which ‘obvious’ reality, my friends who are attorneys chorus, “It has ever been thus …”
I am certain my friends mean well, however I do not find comfort in their assessment, neither do I find much reason for hope (audacious or otherwise) for the future should these cozy and mostly, unremarked upon, “relationships” or “connections” (whether it be Tucker’s failure to mention his father’s relationship to Scooter or the admitted fact of Krugman’s being hired at Princeton by Bernanke) not be understood and ‘factored’ into the overall ‘appreciation’ of the quality of the information made avasiable to the ‘little people’, assuming it is not to be made secret for reasons of “National Security”.
I keep hearing Pelosi say, “You don’t know the half of it.”
Which leads one to wonder, “Why not?”
Which then gives rise, forgive me, to some ’suspician’ that it is deliberately INTENDED that we not know more than a few things.
Hmmm, I had intended a slightly humorous, ‘raised eyebrow’ response to your comment, Marcy, but instead, found myself waxing serious …
Sen. Brown now up. Didn’t ask the banks how they would use the money. Little accountibility from the banks.
Second group of witnesses coming to the table.
So EW, do you think there will be the votes to get this done after the hearings?
I think GM, at least, might get the $4 billion. Chrysler I’m less sure of. The Senators haven’t missed the fact taht Chrysler’s just asking for a chunk of cash so it can get to the point where it sells itself.
They could require that Chrysler not go around trying to sell itself.
Naw, Chrysler wither needs to be sold or folded. It is not viable as it currently exists.
He made his points very well.
The Johnson Controls Prez is being very effective. If Shelby goes against this he will be seen as very shortsighted.
Wandell kicking butt. Like how he hit the small business initiative and noted the women and minority significance.
He is doing great on laying out the supply chain reality…
Told you they brought him in (last thread) t hit the hybrid issue.
He hits on the effects of not passing on his company, would effect future hybrid development.
Okay, can we hear this kind of benchmark accountability for the financial industry?
Put him in charge of the board…
Zandi did make forceful points. Dodd is going right to him.
Need TARP funds into the vehicle financing for leasing and purchasing.
Nice pressure on TARP. Like how Dodd is hitting this.
Dodd delivers a little slap down on Shelby.
Zandi tells Shelby bankruptcy is not a great option.
I like Zandi. I think he’s at tremendous risk of getting picked to run the oversight board.
Menendez hits the the nail on the head regarding anti-union sentiment.
Zandi just got the just of trustee.
Zandi just got the job of trustee.
Gettelfinger did a good job.
Wow, at the 43 minute of the second or third hour, Schumer posed a really good point — a Car Czar would be more workable than an oversight board. But UAW’s Gettlefinger (?sp) raised foreign competition, health care — -pulled back to show The Big Picture, and wow! watch nobody follow up on his points.
And hat tip to Sen Jack Reed for asking how the financial arms of these corps can move money, etc, etc to confuse results. And about how interconnected the financial arms are with the producers…
Hope these are only ‘first salvos’ in a longer conversation.
(There a lot of Hyundias driving around in my region the past few years, so the UAW rep’s points really hit home with me.)
Did anyone call out Shelby on the foreign automakers in his state yet?
Not really. The best that happened is that the Moodys guy whom klynn and I have hired to be the new Auto Czar kind of sneeringly told him that bankruptcy wouldn’t work.
I guess Sherrod Brown’s staff is reading here. Good checking on the DOE status.
klynn, I missed exactly what he said–what’d he say?
The DOE applications have not been denied. They have been sent back asking for more information which is part of the normal process with RD DOe grants/funding.
Am I the only one here who’s ears perked up back when the word “Cerberus” was mentioned…?
Just finally had a moment to check Wikipedia again for this, and lookee here — maybe by the time anyone from here links to the page for Cerberus, the almost-instant update about Sen Bob Corker mentioning it in today’s hearing will still be there.
Saw that. I was thinking he may have possibly tipped toed into an SEC violation there.
Bob Corker can kiss my ass.
Shorter Corker: “We Republicans would love to support this if y’all would go through bankruptcy and broke the union.”
And, btw, Corker caused a 10% drop in stock with his claim that the DOE loans had been rejected.
Nice job, fucker.
I wonder who he told before dropping that bit of news and how was that information used.
That was his intention I suspect. What does WV want?
MSM HAS to get Sherrod Brown back on the record clarifying Corker’s mis-speaking.
He is a stupid*&^&$^$^&.
How about the state of Tenn pick up the retirement benefits of all UAW employees nationally.
If there were a Guiness World Record awarded for stupid investments, Cerberus would be the record holder in multiple categories. Let their investors lose their money. We could own Chrysler outright several times over for the money they’re asking for (not that we would want to). Screw Cerberus. How much influence does John Snow have in these investment decisions? The guy is simply an idiot.
Finance is far from my area of expertise, but when something is as big as Cerberus, there’s probably a lot more than meets the eye. No doubt it’s a place where black is white, etc.
But Reed (or someone) asked a few intriguing questions:
1. Are the car companies just a way for players like Cerberus to access billions of Treasury bailout $$ with ZERO transparency?
2. Is Chrystler a way for Cerberus to hold onto patents? Would Chyrstler be worth more ‘dead than alive’ to Cerberus?
None of this is my field of expertise, but they are interesting questions.
Lots of players in the background, no doubt.