Automotive News - December 1, 2008 - (Page 12) 12 • DECEMBER 1, 2008 opinion Detroit 3 loans: There’s a template for success Some people in Detroit were offended by the way Republican and Democratic lawmakers treated the Detroit 3 CEOs during last month’s congressional hearings on emergency aid to the companies. With typical congressional flair, much of the criticism was rude, unfounded and based on old stereotypes and misimpressions. But that’s history. General Motors, Ford Motor Co. and Chrysler LLC seemed ill-prepared to make their case for help. Now they must deliver comprehensive business plans to Congress that show what they already have accomplished, what they plan to do and how they can remain viable. The Detroit 3 CEOs Many in Congress seem to enjoy bashing corporations and and the UAW their executives, which can make it easy to lose sight of what is at president have stake. The impending disaster for another chance some of the Detroit 3 isn’t about corporations and other instituto get it right tions. It’s about people — milon behalf of millions lions of people who would lose their livelihoods if GM goes bankrupt and triggers a depression. of people. Although the CEOs and UAW President Ron Gettelfinger made a bad first impression in Washington, they have another chance to get it right on behalf of those millions of people. To make the most of the opportunity, the Detroit 3 should use the template created by Chrysler Corp. and its chairman, Lee Iacocca, to obtain federal loan guarantees in 1979. Back then, it was all about equality of sacrifice. The bill that authorized as much as $1.5 billion in federal loan guarantees passed both houses of Congress and was signed into law by President Jimmy Carter in December 1979. It required Chrysler’s stakeholders to raise at least $1.4 billion before the loan guarantees could be used. Painfully, UAW President Doug Fraser saved the bailout by persuading the union’s Chrysler employees to accept $462.5 million in wage and benefit concessions. Nonunion employees took $125 million in pay cuts. Suppliers and dealers contributed $180 million. Chrysler’s U.S. financial institutions put up $500 million, and even the automaker’s foreign lenders came to the table with $150 million. The automaker also needed to raise at least $300 million by selling assets and $250 million from state and local governments. Wisely, the bailout package allowed stakeholders that made sacrifices — and the government — to profit handsomely when Chrysler was healthy again. They all did. That should be one of the assumptions this time, too. It’s a year from now. Back in 2008, Congress decided to let the auto companies fend for themselves. General Motors filed for Chapter 11 in early 2009. Floor traffic stopped in showrooms. GM factories shut down, and soon suppliers started to shut down as well. Six weeks later, Ford Motor Co. had to suspend operations because many of its major suppliers had gone dark. Chrysler LLC suspended operations at about the same time. It had run out of money, and owner Cerberus wasn’t interested in supplying Chrysler with any more cash. With the huge losses from GMAC Financial Services as well as Chrysler, Cerberus folded quickly. Another Wall Street firm disappeared, but this time there was no federal rescue. Nearly 10,000 car dealers ran out of newcar inventory. Some became used-car dealers and continued to service their old DAILY AUTO NEWS >> You can get the news you need every day. Go to www.autonews.com/signup and sign up for our daily e-mail newsletter. Pretend it’s December 2009 franchises until the parts ran out. Others continued to operate with Asian and European franchises that they already had. Thousands of dealership employees were let go. They weren’t needed anymore. Tens of thousands of autoworkers, mainly UAW, were sent home with only unemployment comp to help. The companies were bankrupt and could pay no benefits. Pensions were paid out of the separate pension plans, but current employees were out of luck. In a few months, it was time for GM to declare Chapter 7. GM sold Europe, Brazil and Australia, which could still produce products locally. GM let go just about everybody, not just assembly line workers. Hundreds of thousands of white-collar and blue-collar workers, as well as tens of thousands of dealership employees, in states across the country went looking for unemployment benefits. They were joined by out-of-luck former employees of Ford, Chrysler and auto suppliers. Before long, the unemployment rolls swelled by millions. Toyota, Honda and Nissan shut down North American manufacturing. Six months later, they were able to replace bankrupt suppliers in the United States with Japanese suppliers. They got their production back up to speed, with much higher import content. Almost a year after General Motors declared Chapter 11, millions of workers are unemployed, hundreds of suppliers have disappeared, and 6,000 dealerships have shuttered their doors. The United States is in a major depression. Now tell me once again why Congress doesn’t want to give the domestic auto industry financial assistance. Wake up, Washington To the Editor: Which employs the most people: the banks or the auto industry? Which provoked your recession: the finance system or the auto industry? Wake up, Washington. ALAIN THIBAULT Sales Manager Thibault Chevrolet-Cadillac-PontiacBuick-GMC Rouyn-Noranda, Quebec Merge the Detroit 3; it’s the way to go To the Editor: I urge Congress to call on the Detroit 3 to merge into one company, USA Motors. Congress can assist in the economics of a transition into a stronger, leaner, future-oriented single entity. A merger would: Cut the combined uppermanagement requirements in half. An immediate and huge reduction in costs would be realized. Reduce redundancies in the production requirement on tools, computer-robotics, etc. — another huge reduction in overall costs. Streamline the supply lines by eliminating half of the overlapping types and designs. Overall production would be far more cost-effective and productive. If the UAW and the Teamsters union were eliminated, it would reduce the cost of the hourly work force and enable USA Motors to be far more competitive in the world market. America is on the doorstep of a historic moment. Congress can rewrite automotive history. Congress: No bailout. Assist in a new, bold future. Merge the Detroit 3. TERRANCE A. BARNES Louisville, Ky. The writer is a service manager for an import-badge dealership. see LETTERS, Page 14 THE WEEKLY NEWSPAPER OF THE INDUSTRY Established in 1925, published every Monday by Crain Communications Inc. Are execs, UAW willing to sacrifice? To the Editor: A letter to the domestic auto industry from a laid-off engineer: The time has come for the domestic automakers and the UAW to have a heart-to-heart talk. It most likely will take years to recover from the greed and excesses of all parties. I believe the government (U.S. taxpayers) should provide loans to help the domestic automakers — but only after the automakers and their employees display a willingness to sacrifice even as U.S. taxpayers and their children and grandchildren will have to sacrifice. Union, salaried and executive employees must be willing to take significant reductions in pay. Executives must set the example by eliminating bonuses until the company becomes profitable. When the companies become profitable, the wealth must be shared Keith E. 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