Automakers Seek Bailout
The Washington Post
Automakers Are Lining Up Aid, But Just Don't Call It a Bailout
By Jeffrey H. Birnbaum and Sholnn Freeman
Washington Post Staff Writers
Sunday, December 4, 2005; Page A01
Troubled U.S. automakers and their allies on Capitol Hill are seeking
billions of dollars in aid from the federal government ranging from health
coverage for their workers to extra tax write-offs for themselves.
They're also asking for one rhetorical favor: Please don't call the requests
a bailout.
"I don't view it as a bailout," Sen. Carl M. Levin (D-Mich.) said.
"We're not looking for a bailout," agreed William C. Ford Jr., chairman of
Ford Motor Co.
The "B" word has been taboo ever since Chrysler Corp., faced with impending
insolvency, sought and narrowly won $1.5 billion in loan guarantees from
Washington in 1979 and 1980. The company eventually borrowed $1.2 billion and
repaid the loans in 1983, seven years earlier than was required.
Nonetheless, the notion of the American taxpayer saving a company with a
large and quick fix has pretty much gone out of style and has not been repeated
since, with the exception of loan guarantees to airlines after 9/11. Even
though General Motors Corp. and its rival Ford Motor now face serious financial
straits, both are studiously avoiding public condemnation by spreading their
aid requests widely among many types of government policies.
Taken together, however, the components of their wish list would cost tens
of billions -- far more than Chrysler ever dared to seek.
With pleadings that large, breaking the requests into smaller pieces makes a
great deal of legislative sense, and industry and labor leaders hope that
several relief packages could begin to move in Congress next year. The outlook
is uncertain, especially given the size of the federal budget deficit, but auto
industry representatives said they were optimistic that at least some of their
proposals would succeed.
"The likelihood of some sort of grand solution probably isn't there," said
Dennis B. Fitzgibbons, director of public policy in Washington for
DaimlerChrysler AG, the firm that was formed when Germany's Daimler-Benz merged
with Chrysler in 1998. "But," he added, "there are pieces that people could
agree on."
Many, many pieces. In a speech in Washington last month, William Ford urged
the government to help domestic automakers by expanding subsidies for companies
that make components for gasoline-fuel-cell hybrids and other fuel-efficient
vehicles. He also asked for federal money to retrain workers and for tax breaks
to help manufacturers outfit old plants with new equipment.
GM has its own elaborate list. It hopes that pension legislation that is
wending its way through Congress will tread lightly on heavy manufacturers such
as GM. The legislation would strengthen the federal backstop to private pension
plans by raising corporate contributions to a fund. The company also seeks
health legislation down the road that would unburden it of the huge cost of
medical coverage that it now offers its 450,000 retirees and their spouses.
One proposal that's being floated is for the government to provide
catastrophic health care coverage. GM has pointed out that the most severely
ill patients, the top 1 percent of health care users, account for 30 percent of
health care costs. The industry also is interested in revising tort law as a
way to alleviate health care costs.
U.S. carmakers also want to persuade the Bush administration to push harder
to get the Japanese to raise the value of their currency. The manufacturers
assert that Japanese cars sell for thousands of dollars less than they should
in this country because the Japanese government unfairly intervenes in currency
markets to artificially depress the yen. The Bush administration rejects claims
that the Japanese government is manipulating exchange rates.
In addition, the companies advocate tougher trade policies that would
restrict the import of foreign cars into the United States where possible and
would ease entry of U.S.-made cars into other countries. "We could sell plenty
[of cars] in Japan if we were allowed to," Sen. Levin said. "We need a
president to go after the Japanese to tell them if they don't reduce their
barriers that they will find similar barriers to theirs" in the United
States.
The car companies are working through several industry coalitions and major
trade groups, such as the National Association of Manufacturers, to press their
case on various issues. Not all parts of the proposals are likely to move at
the same time, auto executives say, but they see an urgent need for at least
some assistance efforts to move soon.
Beset by falling sales and rising health care and pension costs, GM and Ford
have suffered through a tough year. GM, the world's largest automaker, said
last month that it would cut 30,000 jobs and close all or part of 12
facilities. Ford, No. 2 in the United States, plans to announce its own
closings and job cuts next month. In figures released last week, both auto
giants reported that their November sales dropped, as sales of Toyota and Honda
vehicles continued to rise.
One reason the car companies are not pressing for a single infusion of money
is that their problems would not be solved by such a benefit. "Their problem is
not so much cash flow to get them through a crisis," said Rep. Dale E. Kildee
(D-Mich.), who has been a leader in devising relief efforts. "It's more of a
structural change in the global automotive market that the auto companies and
the auto-parts makers need to cope with."
The assistance that is being sought would address only some of the
companies' problems, which range from inefficient factories to consumer
preferences for foreign-built cars. Auto executives acknowledge that recovery
will depend on their ability to resolve such issues.
Senators and House members have been meeting privately among themselves and
with auto company executives for weeks and expect to have further planning
sessions. Much of what they will ask for is part of an effort in general to
revive what has been a floundering manufacturing sector.
"What we would be doing is common sense -- fighting for a manufacturing base
for this country," Levin said. "We have to decide if we want to have
manufacturing jobs or [if] we want to put up with losing millions of more
jobs."
Michigan's congressional delegation has led the effort to aid the industry,
but lawmakers from many other states may be sympathetic: Cars and their parts
are made in many areas of the country. The auto industry is directly or
indirectly responsible for 13.3 million jobs nationwide, according to a report
by the University of Michigan and the Center for Automotive Research, although
that includes the U.S. operations of foreign automakers.
Republican lawmakers from regions affected by the auto company retrenchment
are joining the drive. Rep. John J.H. "Joe" Schwarz, a freshman Republican from
Michigan, has been working on a universal health care plan modeled on federal
employees' benefits that potentially would help GM, Ford and DaimlerChrysler
unload billions of dollars in annual health care costs for current workers and
retirees. "It is wrong to destroy the middle-class dream in America," Schwarz
said. "We are going to have to find a way as a country to work our way through
this."
But it's not clear how united the industry is. For example, GM cares more
about pensions than Chrysler because Chrysler, as a smaller company, has far
fewer retirees. The industry's big trade group, the Alliance of Automobile
Manufacturers, has also been on the sidelines because it focuses mainly on
trade and safety issues and represents foreign-owned car companies as well the
U.S. automakers.
"There's no umbrella group," said Alan Reuther, the legislative director of
the United Auto Workers union. "It's not like we all have the same talking
points and it's all lockstep on things like relief for the industry."
Even the Michigan delegation has had its tensions. In mid-November, members
of the delegation met at the Capitol to discuss auto industry issues with
Michigan Gov. Jennifer M. Granholm (D). The meeting was stalled as Republicans
and Democrats battled over Republican Rep. Candice S. Miller's attempt to open
the meeting to reporters. Democrats said opening the meeting was an attempt by
Republicans to embarrass Granholm, who is up for re-election next year. Once
the doors were closed and members cooled off, however, the participants began
to work together.
But what they discussed, participants insisted, was not a bailout.
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