Republican Urges Automakers to Change Management Teams

November 19, 2008 - 10:14 AM
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Washington (AP) - The senior Republican on the Banking Committee said Wednesday he doesn't believe there will be a turnaround in the troubled U.S. auto industry until its top management is ousted and its manufacturing operations are revamped.
 
"I don't think they have immediate plans to change their model, which is a model of failure," Sen. Richard Shelby said, a day after the top executives of General Motors, Ford and Chrysler came to Congress to plead for a $25 billion "bridge loan" to avert layoffs and plant closings.
 
"I think a lot of it will be life support," Shelby, R-Ala., said. "I believe their best option would be some type of Chapter 11 bankruptcy ... These leaders have been failures and they need to go."
 
Rep. Barney Frank, D-Mass., disagreed with that, saying choosing the bankruptcy option would likely mean abrogation of labor contracts. "We already have too much union busting," said Frank, appearing on CBS's "The Early Show" with Shelby.
 
Frank called bankruptcy "the favored spectator sport" for political leaders who wish to dodge a tougher decision. Whatever the various arguments, Detroit is running out of time.
 
The automakers' top executives will return to Congress on Wednesday, appearing before a House committee to make the same plea they made Tuesday to the Senate Banking Committee.
 
Facing a less-than-receptive greeting there, General Motors Corp. CEO Rick Wagoner warned that the failure of the U.S. auto industry could lead to a loss of 3 million jobs within the first year and ripple throughout communities around the country.
 
"This is all about a lot more than just Detroit. It's about saving the U.S. economy from a catastrophic collapse," Wagoner said.
 
Dire assessments aside, the rescue plan appeared stalled on Capitol Hill, opposed by the Bush administration and Republicans in Congress who are reluctant to use the Treasury Department's $700 billion financial bailout program to come up with the $25 billion in loans.
 
"You're asking an awful lot," said Sen. Christopher Dodd, D-Conn. "I'd like to tell you that in the next couple of days this is going to happen. I don't think it is."
 
A Senate vote on an automotive bailout plan, which would also extend jobless benefits, could come as early as Thursday, but it currently lacks the support to advance.
 
In an op-ed essay in Wednesday's editions of The New York Times, Mitt Romney, a candidate for this year's Republican presidential nomination, wrote: "If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won't go overnight, but its demise will be virtually guaranteed."
 
Romney, who was born in Detroit and whose father was an auto industry executive, wrote: "Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course -- the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check."
 
Rank and file Republicans and Democrats from states heavily affected by the auto industry worked behind the scenes trying to develop a compromise that could speed some aid to the automakers before year's end. But it was an uphill fight.
 
Automakers were running into bailout fatigue on Capitol Hill. Lawmakers complained that many of the industry's problems were self-made, citing their past reliance upon gas-guzzling trucks and SUVs and opposition to tougher fuel efficiency regulations. Many wondered if the companies would be back for more money in a year.
 
Chrysler LLC CEO Bob Nardelli rejected suggestions that the automakers should seek Chapter 11 bankruptcy protection similar to airlines that later emerged restructured and leaner. "We just cannot be confident that we will be able to successfully emerge from bankruptcy," Nardelli said. Ford Motor Co. CEO Alan Mulally said the three automakers are highly interdependent.
 
The financial situation for the automakers grows more precarious by the day. Cash-strapped GM said Tuesday it would delay reimbursing its dealers for rebates and other sales incentives and could run out of cash by year's end without government aid.
 
Given the concerns, Democrats in the Senate discussed but rejected the option favored by the White House and GOP lawmakers to let the auto industry use a $25 billion loan program created by Congress in September -- designed to help the companies develop more fuel-efficient vehicles -- to tide them over until President-elect Barack Obama takes office.
 
House Speaker Nancy Pelosi, D-Calif., and other senior Democrats, who count environmental groups among their strongest supporters, have vehemently opposed that approach because it would divert federal money intended to develop vehicles that use less gasoline.
 
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Associated Press writers Julie Hirschfeld Davis and Tom Raum contributed to this report.