Posted by: David Kiley on November 25, 2008
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.