Automotive News - November 24, 2008 - (Page 27) NOVEMBER 24, 2008 • 27 BAILOUT BATTLE Detroit 3 squeezed by cash crunch, politics Harry Stoffer hstoffer@crain.com WASHINGTON — If the Detroit 3’s cash and credit crises don’t send the companies over the edge, a political stalemate on Capitol Hill could provide the final shove. As the automakers implored Congress last week to provide emergency federal aid, the CEOs of General Motors and Chrysler LLC said their companies’ minimum cash reserves can be measured in weeks’ supply. At week’s end, House Speaker Nancy Pelosi, D-Calif., insisted that “doing nothing is not an option” to assure the Detroit 3’s survival. Still, Pelosi and other leaders of Congress won’t consider the pleas for at least two more weeks. They say they first need to see the automakers’ plans for “viability.” Any new aid to the industry could come wrapped in tight strings, such as new fuel economy mandates. Many lawmakers of both parties say they want to lend the Detroit 3 $25 billion to bail them out. But how to do that is an issue that continues to create deep divisions not only between the parties but within them. Lawmakers from auto states, led by Sen. Carl Levin, D-Mich., support a bipartisan compromise that would redirect $25 billion in loans approved to help automakers and suppliers build more fuel-efficient vehicles. Instead, that money would be used to tide the Detroit 3 over at least until President-elect Barack Obama and a new, more Democratic Congress take office in January. Waxman could mean trouble for Detroit Harry Stoffer hstoffer@crain.com New sheriff How will the House Energy and Commerce Committee’s dealings with the auto industry change with Rep. Henry Waxman, D-Calif., in charge rather than Rep. John Dingell, D-Mich.? The committee may Require deeper, faster cuts in greenhouse gas emissions Not block state-by-state vehicle greenhouse gas emission limits Require factories to pay for greenhouse gas emission permits Direct permit proceeds to fund alternative energy technology Seek to impose tougher fuel economy rules on automakers Consider new vehicle-safety legislation “Waxman is going to give us the Beverly Hills version of a green agenda,” Wolkonowicz told Automotive News. “That’s going to increase the cost of autos for all Americans.” House Democrats voted last week to dump Dingell, who represents a district in suburban Detroit, as chairman of the energy panel. Dingell, 82, has been the committee’s top Democrat since 1981. Environmentalists and their allies criticized Dingell for years for blocking efforts to boost CAFE standards. They bristled at his opposition to state greenhouse gas rules. WASHINGTON — Come January, the climate in Congress is likely to grow chillier for the auto industry — and especially the Detroit 3 — on issues such as fuel economy, auto pollution and global warming. Rep. Henry Waxman, one of the domestic automakers’ chief antagonists, will replace Rep. John Dingell, the Detroit 3’s best friend in Congress, as chairman of the House Energy and Commerce Committee. The panel handles many of the bills the industry cares most about. Waxman, 69, is a close ally of another California Democrat, House Speaker Nancy Pelosi, who is thought to have wanted Dingell out. Waxman’s Southern California district includes the enclaves of Beverly Hills and West Hollywood. Waxman routinely has accused the Detroit 3 of dragging their feet on improving fuel economy. He is expected to seek even tougher corporate average fuel economy, or CAFE, standards than are part of current law. Those standards now call for a 40 percent increase in fuel economy, to 35 mpg, by 2020. week, other Republicans — many of them Southern lawmakers with import brand assembly plants in their states — argued that any further aid to the Detroit 3 would waste taxpayers’ money. They said the companies should declare bankruptcy and reorganize with less-generous labor contracts and fewer dealers. Changing story Pelosi complained late last week that the Detroit 3 “keep changing” the rationale for their aid request — first to build fuel-efficient vehicles, then to advance a merger of GM and Chrysler, most recently to overcome liquidity crises. She said the CEOs did not make a persuasive case for aid in their testimony before congressional committees. Pelosi added: “I’m very optimistic and hopeful they have gotten the message.” Levin said last week that he thinks lawmakers would have approved the bipartisan aid measure if they had been given the opportunity. The compromise still may be the best basis for aid to the Detroit 3, he said. By Dec. 2, the automakers must submit detailed plans to Congress that show how they intend to overhaul their operations and become viable. The House Financial Services Committee and Senate Banking Committee would hold hearings on the plans that week. Then Congress could return the week of Dec. 8 to consider aid legislation. Levin said the added delay poses risks for the struggling companies. He warned that Congress has taken on a heavy responsibility in trying to judge the automakers’ viability. At last week’s hearings, many lawmakers focused on symbolic rather than substantive issues. They challenged the CEOs to cut their salaries to $1 a year and criticized their use of corporate jets to get to Washington. But they managed to get GM’s attention. On Friday, the company pledged to get rid of two of its jets. c Dingell: Dumped by Democrats Waxman: Detroit antagonist Greenhouse gas curbs Waxman supports allowing states to enforce their own rules aimed at restricting greenhouse gas emissions from vehicles. The Detroit 3 are challenging those rules, saying they represent back-door regulation of fuel economy — solely a federal responsibility, they argue. The new chairman also calls for tougher national limits on greenhouse gas emissions to help curb global warming. Dems at odds Pelosi and Senate Majority Leader Harry Reid, D-Nev., blocked that approach last week, saying it would violate the intent of the loans. Some Democrats want to impose even tougher fuel economy standards on the Detroit 3 as a condition of any further aid. Reflecting that tougher line was House Democrats’ election last week of Rep. Henry Waxman of California to replace Rep. John Dingell of Michigan as head of the House Energy and Environmentalists were gleeful last week at Waxman’s ascent. “Waxman’s victory is a breath of fresh air — of clean air,” said Frank O’Donnell, president of Clean Air Watch, a Washington environmental group. “It was a stunning defeat for the corporate lobbyists.” O’Donnell predicted that House Democrats’ choice of Waxman enhances the prospects of “effective” global-warming legislation when President-elect Barack Obama takes office in January. Other assessments were more critical. John Wolkonowicz, an analyst with IHS Global Insight, an industry research firm in suburban Boston, called Waxman’s election “the worst news of the week for the domestic auto industry.” ‘A change year’ After his defeat, Dingell observed that “this was clearly a change year.” He pledged to cooperate with Waxman when the new Congress takes office in January. UAW President Ron Gettelfinger called Dingell’s ouster “politics.” At the same time, Gettelfinger said, the UAW is “looking forward to working with Representative Waxman.” c Bradford Wernle and Amy Wilson contributed to this report Commerce Committee, which handles much auto-related legislation. Waxman is a Detroit 3 antagonist, while Dingell is the companies’ chief ally in Congress. Pelosi and Reid want to carve out $25 billion in low-interest loans for the Detroit 3 from the $700 billion financial bailout fund. President George W. Bush has ruled out that proposal. He and key GOP lawmakers advocate the redirection of the fuel economy loans to help the companies. But at high-profile hearings last GM formulates a ‘Plan B’ if it doesn’t get federal loan Jamie LaReau jlareau@crain.com DETROIT — Without a federal bailout, extreme cost cutting will be needed to reduce General Motors’ cash burn enough for the automaker to survive the next few months. Company executives say GM needs $11 billion to $14 billion on hand to operate. According to some estimates, cash already is down to that level despite an aggressive cost-cutting campaign launched in July. Says Global Insight analyst Rebecca Lindland: “Everything — I mean everything — should be on the table at this point.” Here’s what GM already is doing to ease its cash-flow crisis: Selling assets. GM recently sold its 3 percent share in Suzuki for $230 million. The company also is shopping Hummer and ACDelco, but any deal would take months to close. Laying off workers. In July, GM announced layoffs of salaried workers that will save $1.5 billion in 2009. More layoffs are possible, but buyout costs will limit quick savings. Delaying product development. With a few exceptions, GM will delay spending on most products in 2009, saving about $1.5 billion. Slashing production. In July, GM announced plans to cut production by 300,000 units in 2009, saving $2.5 billion. More recently, GM said it will What a difference two months make: GM CEO Rick Wagoner announces the future site of a new engine plant in Flint, Mich., in September. With GM making deep slashes in production, the need for new engines will wane. © GM CORP. shut five assembly plants temporarily to reduce inventories of full-sized SUVs, pickups and crossovers. Delaying incentive payments to dealers. A two-week delay will push back $300 million in payments from Nov. 28 to Dec. 11. Sources say GM executives are forging a no-bailout plan based on a worst-case scenario meant to keep the company running until President-elect Barack Obama takes office in January. If General Motors gets no federal help by year end, look for it to delay payments to suppliers, slash whitecollar jobs and salaries and gut its marketing campaigns. The cuts could even seep into r&d — the vital core activity crucial to GM’s longterm success. The
Table of Contents Feed for the Digital Edition of Automotive News - November 24, 2008 Iacocca tip: 'Equality of sacrifice' Ch. 11 would hit dealers hard â fast Detroit 3: Bankruptcy = doom Down the road and a continent away Used-vehicle demand shrivels O'Neill will lead Power GM tweaks production plan Mitsubishi: No to Detroit Ford will cut more output Nardelli: Chrysler is running on fumes GMAC on brink of bankruptcy, S&P warns Off with their heads! (But whose?) In defense (kind of) of Detroit Bailout Motors? Britain went down that road CEOs could have pre-empted the grilling Ford: We still want Mazda expertise Imports clog ports as sales plunge Volvo's N.A. boss will resume leases to boost volume Nissan expects Chrysler pickup deal will survive Toyota: Venza is a trendsetter, not a crossover It's time to put partisanship aside; Detroit needs help What GM needs is GMAC.2 'Buy American' talk won't help industry Readers weigh in on auto industy woes No one bailed out Oldsmobile It's time to move to mass transport We still need manufacturing Bankruptcy is a bet Let's get wages under control Will America be better off? First step: Bring the jobs home America owes it to GM to help The answer is simple: Leasing What about dealerships? Detroit 3 CEOs must offer to quit Oct. truck sales fall 17.4% Honda plant adds parts center They're sold on Camaro Drawn to Ferrari Japan poised to control key batteries Europe's worst month hits all automakers Dealers BMW: Diesel 7 series could come to U.S. Honda's FC Sport mixes green and go Infiniti G37's hard top retracts in 30 seconds Redesign of Lexus RX series hard to see Mini electric: Jolt comes from sticker Ford hybrid sedans aim at Camry After only 3 years, Ford revamps Fusion Hyundai plans new crossover, turbo engine Restyled Mustang: More refinement, horsepower Honda: Don't count on CR-Z gasoline variant '09 Nissan Z delivers more of what fans like Mazda3 gets new look, powertrains Nissan Cube joins the box brigade Infiniti upgrades powertrains Lincoln MKZ gets a makeover Porsche won't stall Panamera 2010 GLK priced below rival Bentley's Azure T gets 500 hp Detroit 3 squeezed by credit, cash â politics Waxman could mean trouble for Detroit GM formulates a 'Plan B' if it doesn't get federal loan Infiniti replaces Igo Sharks vs. Jets, D.C.-style What's good for â uh, how'd that go again? Mazda deal imperils Ford training ground More like Toyota, Honda? Careful what you wish for Maybe he's Buck-a-year Bob now Romney: Bankruptcy, not bailout Automotive News - November 24, 2008 Automotive News - November 24, 2008 - (Page Intro) Automotive News - November 24, 2008 - Detroit 3: Bankruptcy = doom (Page 1) Automotive News - November 24, 2008 - Detroit 3: Bankruptcy = doom (Page 2) Automotive News - November 24, 2008 - Ford will cut more output (Page 3) Automotive News - November 24, 2008 - Off with their heads! (But whose?) (Page 4) Automotive News - November 24, 2008 - Off with their heads! (But whose?) (Page 5) Automotive News - November 24, 2008 - CEOs could have pre-empted the grilling (Page 6) Automotive News - November 24, 2008 - CEOs could have pre-empted the grilling (Page 7) Automotive News - November 24, 2008 - Volvo's N.A. boss will resume leases to boost volume (Page 8) Automotive News - November 24, 2008 - Volvo's N.A. boss will resume leases to boost volume (Page 9) Automotive News - November 24, 2008 - Toyota: Venza is a trendsetter, not a crossover (Page 10) Automotive News - November 24, 2008 - Toyota: Venza is a trendsetter, not a crossover (Page 11) Automotive News - November 24, 2008 - 'Buy American' talk won't help industry (Page 12) Automotive News - November 24, 2008 - 'Buy American' talk won't help industry (Page 13) Automotive News - November 24, 2008 - Detroit 3 CEOs must offer to quit (Page 14) Automotive News - November 24, 2008 - Drawn to Ferrari (Page 15) Automotive News - November 24, 2008 - Japan poised to control key batteries (Page 16) Automotive News - November 24, 2008 - Dealers (Page 17) Automotive News - November 24, 2008 - Dealers (Page 18) Automotive News - November 24, 2008 - Dealers (Page 19) Automotive News - November 24, 2008 - Dealers (Page 20) Automotive News - November 24, 2008 - Dealers (Page 21) Automotive News - November 24, 2008 - Dealers (Page 22) Automotive News - November 24, 2008 - Mini electric: Jolt comes from sticker (Page 23) Automotive News - November 24, 2008 - Restyled Mustang: More refinement, horsepower (Page 24) Automotive News - November 24, 2008 - Bentley's Azure T gets 500 hp (Page 25) Automotive News - November 24, 2008 - Bentley's Azure T gets 500 hp (Page 26) Automotive News - November 24, 2008 - GM formulates a 'Plan B' if it doesn't get federal loan (Page 27) Automotive News - November 24, 2008 - Infiniti replaces Igo (Page 28) Automotive News - November 24, 2008 - Infiniti replaces Igo (Page 29) Automotive News - November 24, 2008 - Romney: Bankruptcy, not bailout (Page 30) Automotive News - November 24, 2008 - Romney: Bankruptcy, not bailout (Page 31) Automotive News - November 24, 2008 - Romney: Bankruptcy, not bailout (Page 32)
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