Toyota, BMW, and Hyundai Workers' Senators Oppose Rescue (Update2)
By Alison Fitzgerald and Jonathan D. Salant
Nov. 17 (Bloomberg) -- Senators from southern states with factories owned by Asian and European car manufacturers oppose a bailout of U.S. automakers, saying the industry can thrive without General Motors Corp., Ford Motor Co. and Chrysler LLC.
Republican Senators Richard Shelby and Jeff Sessions of Alabama, and James DeMint of South Carolina, are among lawmakers trying to derail Democratic plans, supported by President-elect Barack Obama, to provide at least $25 billion in loans to the three U.S. companies.
``We have a very large and vibrant automobile sector in Alabama,'' Sessions told Bloomberg Television on Nov. 11. ``I don't feel like this is the end of the world.''
Alabama has two assembly plants owned by Stuttgart, Germany-based Daimler AG, one operated by Tokyo-based Honda Motor Co. and one by Seoul-based Hyundai Motor Co. Munich-based BMW AG employs about 4,500 people at a Spartanburg, South Carolina, assembly plant.
The proposal to loan automakers $25 billion from October's $700 billion financial rescue package will be debated during a post-election lame-duck session of Congress this week.
Senate Banking Committee Chairman Christopher Dodd plans to hold a hearing tomorrow on the legislation, which he supports. House Financial Services Committee Chairman Barney Frank, who is drafting the legislation with Michigan Senator Carl Levin, plans a hearing the following day. GM Chief Executive Officer Rick Wagoner and Ford CEO Alan Mulally are scheduled to testify before the committees.
`Tough Sell'
The bill will likely be a tough sell with many Republicans who, in principle, oppose government intervention in the private sector.
``Companies fail every day and others take their place,'' Shelby said on CBS's ``Face the Nation'' yesterday.
Bush said he opposes using money from the $700 billion fund designed to ease a global credit crisis. Instead he called on Congress Nov. 14 to use money from a previously approved proposal for auto-industry loans originally intended to aid development of more fuel-efficient vehicles.
``Taxpayers should not have to subsidize private companies that are unwilling to show they can be viable,'' White House spokeswoman Dana Perino said today in an e-mailed statement. ``It is clear that U.S. automakers must restructure in order to be viable.''
Bailout Votes
Perino said this morning that Democrats don't have enough votes in the Senate to pass a bailout using money from the $700 financial rescue fund.
House Speaker Nancy Pelosi said Nov. 15 that diverting money from the earlier plan to ease a current cash crisis would be ``a step backward'' in promoting long-term auto-industry competitiveness. Democratic leaders want to use some of the money from the $700 billion financial-rescue package to meet automakers' emergency needs.
The outcome may depend on action by the Senate, where Democrats' narrow 51-49 working majority gives Republican opponents a better opportunity to block a bailout. While the party will pick up at least a half-dozen seats as a result of Nov. 4's elections, those changes won't take effect until January.
Senate Majority Leader Harry Reid on Nov. 14 urged his Republican counterpart Mitch McConnell of Kentucky to allow a vote. McConnell made no such promise.
Deficit Impact
``Senator Reid has not yet provided us with the text of his proposed spending bill, or the cost to the taxpayer, or its impact on the deficit,'' McConnell said. ``So it would be a real challenge to promise any level of support or opposition sight unseen.'' Kentucky has Ford, GM and Toyota Motor Corp. assembly plants, and a Toyota engine factory.
The U.S.-based automakers are seeking a cash infusion as industrywide sales have plummeted to a 17-year low as the economy slides into a recession. GM this month said it lost $4.2 billion in the third quarter, and almost $73 billion since the end of 2004. The largest U.S. automaker said it may not have enough cash to get through the year. Ford lost $2.98 billion in the third quarter as sales fell 22 percent
Job losses would total 2.5 million from an automaker failure in 2009, including 1.4 million people in industries not directly tied to manufacturing, according to a Nov. 4 study by the Center for Automotive Research in Ann Arbor, Michigan. A collapse of General Motors would cost the government $200 billion in aid to states and extended unemployment benefits, said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts.
`Wise Business Decisions'
While sales are also falling for Asian and European manufacturers, their financial conditions aren't as bleak.
``We have a number of profitable automakers in America, and they shouldn't be disadvantaged for making wise business decisions while failure is rewarded,'' DeMint said. ``If the Big Three can't make it with their current structure, they can protect jobs by reorganizing under bankruptcy protection.''
Wesley Denton, a DeMint spokesman, said the senator plans to offer amendments to any bailout legislation approved by the House, which could make it more difficult to quickly get a bill to Bush's desk. Senator John Cornyn of Texas said Nov. 14 that he also opposes the plan. Texas is home to assembly plants for GM and Toyota.
Financial Straits
``The financial straits that the Big Three find themselves in is not the product of our current economic downturn, but instead is the legacy of the uncompetitive structure of its manufacturing and labor force,'' Shelby said. The Big Three's current crisis is ``not a national problem, but their problem,'' Shelby said.
That problem could spread beyond Michigan, Ohio and Indiana, where the U.S.-based companies and their suppliers are most heavily concentrated. U.S. automakers buy parts in many states: Ford, for example, spent $2 billion in Alabama last year and $3.5 billion with Kentucky suppliers, according to a Ford document. Companies that make parts for General Motors, Ford and Chrysler also often count Toyota, Honda and other overseas-based companies among their customers.
``We're worried. We're concerned about it,'' said Mike Goss, a spokesman for Toyota's North American manufacturing unit in Erlanger, Kentucky. ``The vehicles we build in North America use about 75 percent local content, and much of that is coming from the same companies that supply the Detroit Three.''
Mike Michels, Toyota's U.S. vice president of media relations, said the failure of one or more of the U.S. automakers would be ``devastating'' for the entire industry.
Campaign Contributions
Failure to get a federal bailout won't be for lack of Washington clout. The U.S. automakers' lobbying and campaign giving dwarfs contributions from their Japanese competitors. GM, Ford and Chrysler spent $20.3 million on lobbying this year through Sept. 30, compared with $8.6 million for Nissan, Toyota and Honda.
Ohio Republican Senator George Voinovich is working with Michigan's two Democratic senators on a letter to colleagues to make the aid ``a reality'' during the lame-duck session, his spokesman Chris Paulitz said.
``The senator believes helping the automakers remain viable is truly putting Main Street over Wall Street,'' Paulitz said.
Ohio has seven automotive assembly plants: Chrysler, GM and Honda each have two facilities, and Ford owns one. There are at least 20 additional auto-related plants in Ohio, including engine factories and stamping plants, most owned by the Detroit carmakers, according to the Center for Automotive Research.
United Auto Workers union President Ron Gettelfinger said Nov. 15 on a conference call and again today on WJR radio in Detroit that all three U.S. automakers may fail without federal financial assistance.
Bankruptcy Threat
``We're on the cliff here, we have to make our case,'' Gettelfinger told reporters on Nov. 15. ``Would you buy a car from a bankrupt automaker? We don't see bankruptcy as a viable option.''
The UAW represents the hourly workers at GM, Ford and Chrysler. The union does not represent workers at the factories of Toyota, Honda and other overseas-based companies, except in a few cases where they operate, or once operated, as joint ventures with U.S. companies. The UAW gave 99 percent of its campaign donations to Democrats in this year's election.
To contact the reporters on this story: Alison Fitzgerald in Washington at afitzgerald2@bloomberg.net; Jonathan D. Salant in Washington at jsalant@bloomberg.net.
Last Updated: November 17, 2008 11:57 EST |
