Where have we seen that headline before?

Detroit News:

Inaction on automakers would cost taxpayers billions

WASHINGTON — The U.S. auto industry’s problems will cost taxpayers plenty whether or not the government helps Detroit. – 10:22 am

Dems, White House agree to $15B auto bailout
GMAC extends deadline for tender offers
Stocks rise on optimism about Detroit bailout
Ford execs say company differs from U.S. competition
Car czar more likely a banker than gearhead
GM to offer lower loan rates
Lopez: Haircut politics bad for Big Three
Iacocca shows support for Big 3 leaders

PDF: Draft of auto bill
PDF: Summary of the auto rescue bill

Had no time to pay attention to today’s hearing by the House Financial Services Committee on federal financial aid for the domestic auto industry. Heck, it may still be going on. (Check CSPAN. Nope.)

Henry Payne of The Detroit News, a critic of government aid, reports at National Review Online what he’s hearing:

Detroit, Mich. — They can’t get it done.

That is the backroom word on Capitol Hill as auto executives from the Detroit Three wrapped up a second, and final, day of hearings before the House in attempt to get a $35 billion loan to keep them solvent.

Instead, speculation is that the Bush administration — loath to watch a U.S. automaker drown in its last month in office — will offer $8-14 billion band-aid to GM and Chrysler (both of which will run out of cash this month) possibly from the TARP.

“Detroit’s automakers will be lucky to get less than half of the $34 billion they’re seeking for survival, as several House members said today there was simply not enough time to examine the industry’s pitch and hammer out a consensus by next week,” reads one report from the Detroit Free Press. “Only stopgap funding of up to $14 billion appeared possible next week.”

This will act as a tourniquet for the two most-crippled automakers so they can limp along until the Obama administration can convene with a new Congress and tackle long-term surgery in the new year.

 Meanwhile, the latest from The Detroit News’ webpage:

• GM Board member says prepackaged bankruptcy ‘a fantasy’
  A member of General Motors Corp.’s Board of Directors today reiterated that the automaker would consider all options, including Chapter 11 bankruptcy, if Congress refuses to loan the company as much as $18 billion in emergency aid. - 5:48 pm
• Chrysler hires bankruptcy advisers
  Chrysler LLC’s hiring of a firm that specializes in bankruptcy proceedings was its adherence to the request by Congress to study the drastic step as an option, the automaker said in a statement today. - 5:02 pm
• GM to lay off 2,000 more workers
  With Congress debating whether to give General Motors Corp. up to $18 billion in financing, the automaker announced 2,000 more layoffs today at three factories. - 5:02 pm
• Congressional agency: Auto aid bill can’t use $25B from energy retooling program
  WASHINGTON — The Congressional Budget Office said a compromise bill to aid automakers can’t provide $25 billion from an Energy Department retooling program, dealing another blow to efforts to win quick aid before Congress goes home for the year. - 5:02 pm

Just started.

The Union of Concerned Scientists has a witness. If only the environmental activists could design the car, THAT would solve our domestic auto industry’s problems.

Two items, one linked to but now sufficiently highlighted yesterday, the Detroit Free Press editorial, “Hey, America: Detroit’s automakers are asking for a loan“:

Can we get something straight between Detroit and the rest of America?

What the auto industry is seeking in Washington is a loan, L-O-A-N, as in something you borrow and then pay back — with interest.

This is not a gift, a grant or a handout. It’s a loan, the kind of thing financial institutions used to do before they all had to scurry to Washington for their own bailouts, which have been far bigger and subjected to considerably less scrutiny than this loan that the auto industry desperately needs to keep operating — and keep millions of people employed.

And an interesting suggestion from Hugh Hewitt, law professor, radio host, Republican, blogger, “Should the GOP Bargain On The Bailout?”

If the GOP’s leadership in the Senate calculates that it must go along with the bailout of the Big Three because of the overall weakness in the economy, I hope they at least bargain for some concession such as a giant tax restructuring for Michigan and Ohio, a demonstration project on the economic effects of tax reform.  If the UAW and industry supporters are going to succeed in opening a fiscal lifeline to Detroit, couldn’t the GOP at least demand that all of Michigan and Ohio provide a demonstration of what a lower corporate tax rate can mean for an economy.  Call them Irish Zones, after the tax policy of the Republic of Ireland, and declare that companies headquartered in Michigan or Ohio will pay 12.5% corporate tax, as all corporations do in Ireland.

Related story: The New York Times runs a post-mortem on the Saturn experiment at GM.

The Detroit News takes a slight breather today in its coverage of the Detroit auto industry, with a mere score of articles, while expanding its sights overseas:

Michigan needs to act like the Big 3

Daniel Howes: Conventional wisdom holds that Michigan is entering Year Seven of its one-state recession because Detroit’s automakers are tanking — and poised to drive off a cliff.

• UAW to suspend maligned jobs bank
• On Capitol Hill, Big 3 put on hard sell

 Toyota to cut domestic output amid slowing demand

TOKYO — Toyota is starting to feel the pinch of the global slowdown at home. 7:04 am

Honda to cut jobs in Britain, Japan amid global slump

Britain new car sales down 37 percent in November

Some place their hopes in nostalgia.

A ’60s classic back in Motown

Schlitz’s Classic 1960s beer is back on shelves after nearly three decades, prompted by demands from aficionados hankering for the maltier, full-bodied lager.

That’s Bobby Bare there, singing “Detroit City.” Can imagine any number of people testifying before Congress last week recalling the line, “Oh, how I wanna go home.”

USA Today, “Officials say auto CEOs must be specific on bailout plans”

Auto executives need to provide more specifics about how they plan to spend taxpayers’ money and crimp their highflying lifestyles if they hope to get aid from the federal government, congressional leaders and key members of the incoming Obama administration said Sunday.
“What we can’t give is a blank check for an industry that isn’t prepared to retool itself,” David Axelrod, a senior adviser to President-elect Barack Obama, said on Fox News Sunday.

“I would hope they will come back to Washington in early December on commercial flights with a plan to do that.”

Milwaukie Journal-Sentinel, “Detroit’s fight hits home in Wisconsin“:

If Congress cannot agree soon on a plan to provide taxpayer-funded loans to the auto industry, the effects will be felt far beyond Detroit, Kenosha car dealer Andy Palmen said Thursday. …[snip]

Palmen, president of Palmen Motors, spent two days in Washington talking to members of the Wisconsin congressional delegation and attending hearings at which chief executives of auto companies testified.

“I felt it was imperative to go because I didn’t want the face of this situation to be misrepresented,” he said. “It was all about the auto executives and top union officials. I wanted to make sure our congressmen and senators saw the ripple effect across the nation would be far greater than their (auto) plants.”

Frank Beckman, WJR, in the Detroit News, “Members of Congress, not auto execs, deserve grilling“:

[Auto] execs Rick Wagoner of General Motors, Alan Mulally of Ford and Robert Nardelli of Chrysler, along with United Auto Workers boss Ron Gettelfinger, were grilled by the ultimate second guessers, the politicians, most of whom don’t have education degrees in economic fields or experience in making decisions on private employment, inventory and global competition.

One wishes the four could have asked the questions instead this week.

Why did members of Congress — such as House Banking Chairman Barney Frank, Senate Banking Chairman Christoper Dodd and others — raise fuel economy standards, adding more than $85 billion in costs as the industry was restructuring itself?

If the reason was forcing automakers to deal with higher gasoline prices, perhaps the politicians could explain why they have made fuel more scarce by blocking domestic drilling for oil and preventing new refineries from being built during the past three decades.

And more…

• New York Times, “Big Three’s Troubles May Touch Financial Sector”
  Detroit Free Press, “Detroit’s new plan: Drive point to Congress“
• Detroit News, “Distressed carmakers bank on lobbying“
• Los Angeles Times, The auto industry hits home for American families“

The prepared testimony from today’s House Financial Services Committee hearing, “Stabilizing the Financial Condition of the American Automobile Industry.”

Panel 2

• Mr. G. Richard Wagoner, Jr., Chairman and Chief Executive Officer, General Motors Corporation
• Mr. Robert Nardelli, Chief Executive Officer, Chrysler, LLC.
• Mr. Alan Mulally, President and Chief Executive Officer, Ford Motor Company
• Mr. Ron Gettelfinger, President, United Auto Workers 

Panel 3

• Mrs. Annette Sykora, Chairman, National Automobile Dealers Association
• Mr. James S. McElya, Chairman and Chief Executive Officer, Cooper-Standard Automotive, Inc.
• Professor Jeffrey D. Sachs, Director, The Earth Institute; Quetelet Professor of Sustainable Development and Professor of Health Policy and Management, Columbia University
• Dr. Matthew J. Slaughter, Professor of International Economics, Tuck School of Business, Dartmouth College

And relevant coverage..

• Big Three press bailout case for second day
  MarketWatch - 54 minutes ago
  If the domestic auto industry were allowed to fail, Wagoner said, “the societal costs would be catastrophic.” Congress is in a lame-duck session in part to …
• Democrats seek to lower expectations for bailout
  The Associated Press - 1 hour ago
  CEO Rick Wagoner told the House Financial Services Committee that collapse of the US auto industry could lead to a loss of 3 million jobs within the first …
• Jockeying Continues Over Aid to US Auto Industry
  CQPolitics.com, DC - 1 hour ago
  By Joseph J. Schatz and David Clarke, CQ Staff The Senate’s top Democrat Wednesday sought to shift the burden of helping the auto industry onto the White …
• Senate seeks compromise on auto bailout as CEOs testify for a 2nd day
  USA Today - 1 hour ago
  “There is a way forward that will help protect the jobs in the auto industry, while also protecting taxpayers,” McConnell, a Kentucky Republican, said. ..

The latter refers to a statement made by Minority Leader McConnell, “A Bipartisan Path Forward to Protect Jobs, Taxpayers“:

So let me suggest a bipartisan path forward that has not yet been offered by the majority. It’s a compromise being worked on by Senators Voinovich and Bond which repurposes funds already appropriated by this Congress to fund a $25 billion loan program for automakers to build advanced technology vehicles—coupled with new taxpayer protections and federal oversight of how the money is spent. This is a proposal which I believe has support from both sides of the aisle, and that actually has the potential to pass right now—not next year.

BusinessWeek’s summary of a theme in yesterday’s Senate Banking Committee:

But it was clear from the statements and questions posed by Senators to Wagoner, Mulally, and Nardelli that many think Detroit’s problems are self-inflicted, and that the companies lack the innovation to climb out of their hole.

The criticisms come both from liberals who believe everyone should drive a little green car and the conservatives who blame executive arrogance and unions for the Big 3′s problems.

You can argue the points, but to maintain any sort of fairness or honesty in policymaking you should also acknowledge that Congress bears responsibility for Detroit’s problems as well. In their zeal to to replace the marketplace in determining what vehicles the manufacturers should produce — 35 miles per gallon?  No, 38! — elected officials* have added thousands of dollars in costs and inefficiences to each vehicle while unleashing a fleet of unintended consequences. You know, consequences like forcing Detroit to produce cars people don’t want to buy.

The Wall Street Journal makes this case in a provocative editorial today, taking on the left-leaning critics, “The Environmental Motor Company — Making Detroit a subsidiary of the Sierra Club.”

When is $25 billion in taxpayer cash insufficient to bail out Detroit’s auto makers? Answer: When the money is a tool of Congressional industrial policy to turn GM, Ford and Chrysler into agents of the Sierra Club and other green lobbies.

That’s the little-understood subplot of the Washington melodrama over a taxpayer rescue for Detroit. In their public statements, proponents describe the bailout as an attempt to save jobs, American manufacturing and the middle-class way of life. But look closely and you can see that what’s really going on is an attempt to use taxpayer money to remake Detroit in the image of the modern environmental movement. Given a choice between greens and blue-collar workers, Congress puts the greens first.

Perhaps Congress should consider lifting some of the mandates it has imposed on the industry, things like CAFE standards, or the various strings attached to the $25 billion authorized in 2005 for “retooling.” No? Well, can we at least have an open discussion of these issues after committee members finish lambasting the auto executives?

* We shouldn’t limit the criticism to Congress. Many governors and attorneys general also claim to be more knowledgeable than the marketplace. From Legal Newsline, “Automakers must cut emissions in return for federal money, AGs say“: (continue reading…)

The Senate Banking Committee has not yet posted the prepared statements from yesterday’s hearing, “Examining the State of the Domestic Automobile Industry,” but the testimony  was available elsewhere:

• Rick Wagoner, General Motors, Chairman and Chief Executive Officer
• Alan Mulally, Ford Motor Company, Chairman and Chief Executive Officer (full prepared testimony here).
• Robert Nardelli, Chrysler, Chairman & CEO, Chrysler LLC
• Ron Gettelfinger, President, United Auto Workers

Don’t immediately see the statements from Sen. Debbie Stabenow (D-MI) and University of Maryland economist Peter Morici.

The three auto executives and UAW’s Gettelfinger are also slated to testify before the House Committee on Financial Services at 10 a.m. today, the hearing entitled, “Stabilizing the Financial Condition of the American Automobile Industry.”

The other panel should have its moments of interest:

• Mrs. Annette Sykora, Chairman, National Automobile Dealers Association
• Mr. James S. McElya, Chairman and Chief Executive Officer, Cooper-Standard Automotive, Inc.
• Professor Jeffrey D. Sachs, Director, The Earth Institute; Quetelet Professor of Sustainable Development and Professor of Health Policy and Management, Columbia University
• Dr. Matthew J. Slaughter, Professor of International Economics, Tuck School of Business, Dartmouth College

CQ Politics has just sent out an update about next week’s post-election session of Congress, “Senate Plans Auto Industry Bailout Debate“:

Senate Democratic leaders plan Monday to take up legislation providing $25 billion in assistance to the struggling domestic auto industry, a spokeswoman said Friday.

The debate likely will lead to a vote on the legislation Wednesday. Details of the bill — and the procedural strategy — remained unclear. Democrats have proposed carving out $25 billion for the automakers from the $700 billion financial industry bailout cleared last month, though that idea has run into resistance from the White House and congressional Republicans.

Banking Committee Chairman Christopher J. Dodd , D-Conn., said it was unlikely there would be enough votes to approve the measure in the face of GOP opposition.

And the House reconvenes Wednesday.

The New York Times also looked ahead in a thorough, multisourced article, “Chances Dwindle on Bailout Plan for Automakers.”

One of the more mystifying, even reckless lines of argument goes something like, “Just let the auto makers go bankrupt. It’s worked for the airlines. Reorganize, streamline, get rid of the union contracts. No sweat.”

The auto industry is at the heart of the country’s manufacturing sector, and bankruptcy would reverberate throughout the economy (not to mention the impact on stockholders), and we’re glad to see pushback against the pro-bankruptcy insouciance. From Bloomberg, “Wilbur Ross Says GM Bankruptcy Filing Would Be a `Total Mess’ “:

Ross, dubbed the “King of Bankruptcy” by Fortune magazine in 1998, said a restructuring bid by one of the three top U.S. automakers would topple its peers and drive weakened suppliers out of business because the credit crunch dried up financing.

“If we were in a different overall economic environment, one of them going down wouldn’t necessarily kill” the industry, he said. A weakened economy and frozen debt markets make an automaker bankruptcy impossible, with a Chapter 11 filing for reorganization resulting in liquidation instead, Ross said.

Failures by automakers and related businesses would lead to a drain on government spending for unemployment benefits, health care and pension recoveries, said Ross, whose WL Ross & Co. is based in New York. GM has said bankruptcy isn’t an option.