CEO Paydays Likely Trimmed in Bailout Bid

Posted by: David Kiley on November 25, 2008

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Members of Congress who oppose the bailout of the auto industry partly on the grounds that the CEOs of Detroit automakers have been making too much money and aren’t willing to make sacrifices in order to get tax-payer funded loans will probably get what they are looking for.

Ford chairman William C. Ford said Tuesday in an interview on National Public Radio that he and the automaker’s compensation committee are talking to CEO Alan Mulally about taking a cut in pay, or deferred salary. “We are looking at it, and we are talking to Alan about it.” Bill Ford stopped taking any compensation from Ford as CEO, a post he gave up to Mulally in 2006, and now as chairman.

“We are sensitive to public opinion, and we are in top of it…we get it,” said Ford.

Ford also said that the automaker is also “taking a good hard look” at its corporate planes, another target of derision by Congress. Ford sold or ended leases on some if its planes this year, and Ford said the company is looking at the whether the rest of them are needed. As part of Mulally’s contract, he not only travels on a private jet paid for by Ford for business, but also much of his personal travel. His wife is also allowed to use the company jet when not accompanied by the CEO.

GM also cut its jets from seven at the start of this year to three. GM CEO Rick Wagoner has not publicly agreed to a pay cut. Chrysler CEO Bob Nardelli has agreed to work for $1 a year, though most of his compensation is tied to the eventual sale of Chrysler.


Instructions to the automakers from Speaker of the House Nancy Pelosi stipulate that a report they must file to Congress on Dec 2 must address “Baring the payment of dividends and excessive executive compensation, including bonuses and golden parachutes by companies receiving taxpayer assistance”

Auto company executives are dithering this week about symbolic, as well as substantive, sacrifices they can offer in a December 2nd report due to Congress. Legislators will read the report, and vote after a Dec. 8 hearing on some piece of developing legislation that would grant the automakers at least $25 billion in loans to help them survive the recession through 2009.

According to some company executives who spoke on condition of anonymity because of sensitive negotiations over the bailout loans, most of the focus of the reports will be specifics on how much money each company is seeking in loans, how it will be spent, how long it will last each company based on reasonable economic forecasts until the economy improves and how it will be paid back.

All the companies are betting that 2009 will be as poor as 2008 for auto sales, and that 2010 could increase by more than one million vehicles based on pent up demand, some economic recovery and looser credit.

The reports will also attempt to better explain what each company has been doing in the areas of fuel economy, quality and technical innovation. “A lot of what we have been doing simply did not penetrate with many Congressional members,” said one frustrated auto company executive. “And all the pundits that are getting op-ed pieces published and air-time on cable have a view of our company that is more than a decade old,” said the same executive.

Vehicles at Ford and GM, for example, compare very favorably against those at Toyota and Honda in fuel economy. Both companies have scored below their Asian rivals on an average basis because Detroit sells greater volumes of pickup trucks and SUVs. But in vehicle-to-vehicle comparisons on fuel economy, Detroit ties or beats the Asians in most categories. Ford on Tuesday was named the top producer of the safest cars in America by the Insurance Institute for Highway Safety.

The automakers in the Senate and House hearings this month ran into a buzz-saw of opposition to their bailout application from many Democrats, as well as Republicans. In part, say many Hill staffers, that was because the elected officials had been home to their states and districts for election events and had heard much opposition from voters over the $700 billion Wall Street bailout. During two days of Congressional hearings this month grilling the automaker CEOs, many members talked of “bailout fatigue” and frustration that banks were still not loosening credit even after getting big infusions of $25 billion or more in some cases.

The reports going to Congress next week are not expected to include major new concessions from the United Auto Workers. Instead, the union, too, will, say the sources, offer something "symbolic, and attempt to tell its story better about the concessions it made in the last contract with the companies. The union will also emphasize the need to provide healthcare for retirees not yet eligible for Medicareas well as accurate information about what UAW members earn. “We heard some of the Congressional members say we are making over $70 per hour, and that’s just not true,” said UAW president Ron Gettelfinger in a news conference last Friday.

Congress, according to the Pelosi letter, is looking for a detailed explanation of how the automakers will meet their pension and healthcare liabilities--two big union issues.

Still, if the reports get a poor reception next week, the auto companies and union are prepared to bring more to the table. “That’s what the hiatus between December 2 and 8th is for,” said a staffer that works for a Michigan House member.

In a letter to the automakers, House Speaker Pelosi wrote: "It is critical that you meet this deadline since we have announced we are prepared to come back into session the week of December 8 to consider legislation to assist your industry. We intend to give pertinent agencies within the executive branch, the Government Accountability Office, the Board of Governors of the Federal Reserve, as well as outside experts, the opportunity to comment on your work," Reid and Pelosi wrote.

Company and union officials have been visiting as many members of Congress as they can to tell their stories one-on-one. “It’s difficult, because there are sixty different views of what should be done, and they are on both sides of the aisle,” said one auto company executive who has been making the rounds.

While more Democrats than Republicans favor lending the Detroit automakers between $25 billion and $50 billion, the toughest obstacle to overcome may be Speaker Pelosi.

The most politically expedient way of getting the automakers immediate help, and the measure for which Republicans are most apt to vote, is to change the language in the 2007 energy bill that grants $25 billion in loans to the companies to re-tool plants for more fuel efficient vehicles. That would buy the companies time until President-elect Obama takes office, after which the new President says he is in favor of tapping more money from the Wall Street bailout fund to help automakers.

But as of today, several sources call it a “non-starter” with Pelosi, a San Francisco Congresswoman who is close to environmental groups who do not want the money to be used for anything but greener assembly plants that make more fuel efficient vehicles.

Senate Democrats are crafting language in a bill that would hold the automakers strictly accountable to making good on the commitments in the original bill, while being able to access the loans immediately. But, so far, Pelosi is said not to be on board.

She and many members of Congress prefer that some portion of the $700 billion Wall Street bailout funds get ussed for the automakers. The Bush White House, as well as many Republicans, do not support that measure.

Reader Comments

Daryl Atamanyk

November 25, 2008 8:40 PM

Ford Chairman William C. Ford said, "We are sensitive to public opinion... we get it." Sorry, but you do not get it at all, Mr. Ford: all that you're doing now, Mr. Ford, is "anything and everything you have to" in order to get the money, to try and save your position in the company, and probably a personal fortune that you have invested in Ford. It's not that you "get it" at all. If you "got it", then you would have been on top of this ages ago. But you and the rest or your ilk have been living in a fairy tale dreamland... and it really is too late to try to pull the wool over our eyes: so why not just "save it" and simply behave with a little human dignity if you can (it's spelled: h-u-m-i-l-i-t-y)... hat in hand, and maybe the "public" will go easy on you... and your ilk. Yours sincerely, Daryl Atamanyk P.S.: What's the maximum you can do to save fuel? ...helping America to ween itself from its addiction.

John

November 26, 2008 12:55 PM

Union labor is only a relative small problem, at $70.00 per hour if it takes an average of 30 man hours to build a car that is only $2100.00 where did the rest of the $20,000.00 go to for a average car? Somebody must be sleeping at the switch somewhere.

Daniel Carrion

November 27, 2008 1:40 AM

All of you so called americans are full of shit. To save the big three is the smartest thing we can do! The big three are AMERICAN ICONS every one of our fathers, there fathers and there fathers have grown up to work on to drive these great american cars trucks ect... They are A big part of america

PacificGatePost

November 27, 2008 2:09 AM

NEW CEO CANDIDATES - Please READ the following letter and SIGN IT. We the shareholders require your acknowledgement before making our decision.

http://pacificgatepost.blogspot.com/2008/03/letter-to-ceos-of-fortune-1000-cos.html

While oversight currently means carelessness bordering on abuse, it should mean DUE DILIGENCE, oversight and good governance.

Dave

November 27, 2008 12:29 PM

Why is it that foreign governments are allowed to pour money into their auto-sectors but we are not? Do people not realize that many foreign governments pay for their autoworkers health care and pension plans every year?

Why the double standard?

www.sithum.com

Paul (Vw)

November 28, 2008 3:28 PM

>>> The most politically expedient way of getting the automakers immediate help, and the measure for which Republicans are most apt to vote, is to change the language in the 2007 energy bill that grants $25 billion in loans to the companies to re-tool plants for more fuel efficient vehicles.

>>> But as of today, several sources call it a “non-starter” with Pelosi, a San Francisco Congresswoman who is close to environmental groups...

Funny how that goes. Democrats try to put blame on the White House saying that it makes sense to steal money from TARP. The White House (and republicans" say they don't have authority to do that, and that it makes sense to change language in another bill for the $25 billion "retooling" bailout/loans already approved. Seems that both sides are playing the fiddle while Detroit burns.

What I find most alarming now is that congress sounds like they want to tell Detroit how to make cars as a consequence of accepting a bailout. Joe Stalin telling the factories what to make didn't really work out too well for the Soviets, did it? If Detroit couldn't figure out how to make cars people would want to drive, what makes us think a bunch of congressmen do?

Snoz

November 29, 2008 7:04 AM

House hearing has become an audition for the 3 stooges of Detroit. To get the bail-out money, the Stooge with the best line wins. Outside of Hollywood, how has being a phony actor equivalent to being a winner in America? Perhaps, America is living in self deception. There's something terribly wrong with America when its currency is being printed 24/7 to bail-out its once proud industrial giants. When all its mighty banks, investment bankers, financial institutions and its biggest insurance company are broke and are subsidized or nationalized. When its people are suffering under high unemployment while their life savings depreciates. When the home they purchased declined by 35% in less than 2 years while their purchasing power declines amidst record foreclosures. Where did America go wrong? Where is America's leaders? Perhaps, America is reaping its harvest because in its two hundred years experiment with democracy, Americans or its government has betrayed its Constitution. America, the beacon of hope and freedom, is now the object of blame and scorn because its economic troubles has spread around the world. It does not help to foster a positive image of America when in the past twenty plus years, America's finest presidents could not launch a helicopter rescue but could instigate oral sex in the oval office or several of its presidents were living on another planet. Going back in history a little further, there was an American president resigned in disgrace, its VP was indicted for bribe while in office and another VP can't spell potato. Since America seems no longer can provide the Madison, Hamilton, and the Washington, it is not enough that America has "In God we trust." America need "from God we ask for help" during this holiday season.

John Davis

November 30, 2008 2:31 PM

****** the big three. **** Detroit. I could really care less what my father and his father drove--Sorry kids but I'm not willing to go bankrupt because of nostalga.

Dave

December 4, 2008 11:11 AM

It seems all assume, whether or not you are for or against this "bail-out", that it would work. Why is that? My guess is all we would buy is more of the same BS that has gotten us to this point. Yeeeesch.

Dave

December 4, 2008 11:22 AM

I heard one of these BOZO'S offered to work for $1. They just don't get it. I'd pay for all the Big 3 automaker CEO's to resign today. Think about it. These are the guys that have brought this collapse through their mismanagement of their respective companies. How many gas crisis does it take to send the Hummer the way of the Edsel? What did the geniuses do when they couldn't sell inventory, they made more cars. And the list of buffoonery goes on...

Willard

December 4, 2008 1:11 PM

NO YOU DON'T GET IT!!! They didn't get it back in the 70's and have had over 40 years to listen to public opinion but have chosen to ignore it because of GREED and COMPLACENCY and LAZINESS! These talking Bozo heads are repulsive. "Look hard at whether or not they'll keep their jets" Pa-leeze. They could've joined NetJets in the first place and saved a fraction of the cost of owning AND probably saved jobs. These idiots need to step down. There are many brilliant CEO's out there that could do a far better job than those three stooges.

worker number_____

December 4, 2008 5:13 PM

A buck a year!!!! Easy when you've been making a shamefully huge sum to this point. A single year of your executive compensation would last me and my family a lifetime!!!!!! THAT is what you fail to understand.
Signed,
49 years old and $16/hr. with NO benefits.
(I would give my right arm for a decent job I could be proud to hold.)
You should all be ashamed.

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