Auto Bailout: Seeking Signs of Sacrifice

House members push for workers to give up some pay and benefits, and ask why executives still don't seem to get the need for change

From left: UAW President Ron Gettelfinger, Chairman and CEO of General Motors Richard Wagoner, Chairman and CEO of Chrysler LLC Robert Nardelli and President and CEO of the Ford Motor Company Alan Mulally. Photo by Chip Somodevilla/Getty Images

By David Kiley

Maybe it would have been a good idea for the chief executives of the U.S. Big Three auto companies and the president of the United Auto Workers to save a few dollars and share a ride to their appearance before Congress, where they are asking for at least $25 billion to keep from going bankrupt.

Three different members of the House of Representatives pointed out on Nov. 19 that the three CEOs and the union chief were flown to Washington in separate, private planes. The representatives used that example to express skepticism that the executives are prepared to make the needed changes in their operations, accountability, and culture to turn around their sinking industry.

"As CEOs of your companies, you should set the standard here of what the future looks like," said Representative Gary Ackerman (D-N.Y.).

Outside the House Financial Services Committee hearing chamber, hallways were abuzz with rumors of dealmaking and jawboning over an auto rescue plan. But House and Senate leaders publicly expressed doubt that legislation would pass this week to free up $25 billion in loans. Indeed, a vote on a proposed bill was canceled because a so-called "test vote" Wednesday showed it wouldn't pass.

Part of the problem for lawmakers who oppose an auto industry bailout is their conviction that $25 billion won't be enough. "I'm not convinced that this money won't be throwing money at a problem that won't be fixed," said Representative Spencer Baucus (R-Ala.),

"Careful Deliberation"

Representative Paul Kanjorski (D-Pa.) said he would consider voting for some provisional funds to the industry. But he wants to take up to three months, into the next Congress, to debate a more detailed bill that would emphasize accountability, oversight, and conditions. "The American people expect and deserve careful deliberation from this body, rather than a blessing of last-minute expedient deals," said Kanjorski.

General Motors (GM) CEO G. Richard Wagoner Jr. called his company's need for funds "more urgent than that." Both Wagoner and Ford (F) CEO Alan Mulally acknowledged they have run models with their companies entering Chapter 11 bankruptcy reorganization. Their conclusion? "It's not viable," said Mulally.

House Banking Committee Chairman Barney Frank said he did not view Chapter 11 as an option for the automakers and admonished those who view bankruptcy as a way of breaking the UAW. "We already have too much union busting," said Frank.

Despite the apprehension in helping the auto industry, there is also a widely held belief in Congress that a combination of deals will ultimately buttress the companies. "In the end, they [enough members of Congress and the Treasury Dept.] will rally and you will get what you want," said Representative Maxine Waters (D-Calif.).

Wage Limits

At the same time, the outlines of stringent conditions on any loans are also taking shape. Some have called for new management atop the auto companies. After the House hearing, GM's Wagoner told Bloomberg Television he would be willing to step down if it was a condition of getting federal aid. Besides a limit on CEO compensation, there has been a spotlight on how much the United Auto Workers and its retirees collect. Older UAW members make more than $70 per hour in combined wages and benefits, vs. around $40 for workers at rival Toyota's (TM) U.S. plants. New hires for the Detroit Three make wages about equal to those new workers for the Asian companies, however.