Treasury To Loan Automakers $17B
MADELEINE BRAND, host:
From the studios of NPR West, this is Day to Day. I'm Madeleine Brand.
ALEX COHEN, host:
And I'm Alex Cohen. Coming up, few states are redder than Texas and yet signs that the GOP is in trouble there.
BRAND: But first, trouble averted, at least for now, in Detroit. The White House is bailing out Chrysler and General Motors, at least for a few months. President Bush announced this morning the companies will receive more than $13 billion this month, with more to come later. The decision saves both companies from having to file for bankruptcy. Still, it comes with a lot of conditions, and it leaves the challenge of saving the auto industry to the next president, Barack Obama. NPR's Frank Langfitt covers labor in the auto industry. And Frank, tell us about these conditions that the auto companies are going to have to meet to get this money.
FRANK LANGFITT: Well, a lot of them look like what was in the House bill that passed a little while ago and President Bush supported. And I just want to rip through a few of them, because I think they're pretty interesting and important for people to understand. One is the government can veto large transactions over $100 million by the companies. The companies are going to have to cut their debt by at least two-thirds; that's going to be by getting lenders to take stock in the companies.
Some of the conditions will get a little tougher for the unions. They're going to have to cut the jobs bank. That's where laid-off workers get nearly full pay, in some cases, for just kind of sitting around. The companies also are trying to offload their healthcare benefits to the union. But instead of giving money to the union to handle those benefits, the unions are going to have take GM stock, which is trading in the neighborhood of about four bucks and could be worthless, you know, if the company goes bankrupt. One of the big ones, though, that really stands out here is for the unions, its work rules and wages. It says that they need to be competitive with the transplants - Toyota, Nissan, Honda - down in the South by the end of next year.
BRAND: Now, Frank, what about this car czar? That idea was floated around earlier. Who will determine if the companies will meet these conditions?
LANGFITT: Well, I think it will be a car czar, and it'll be somebody, I think, President-elect Obama selects. And the - what they're going to be looking for is to see, you know, are these firms viable going forward? And the way they describe it is having a positive net present value. Well, that's an interesting idea, and it's not necessarily easy for these companies. Let's take Daimler; they used to own Chrysler. They still own a part of the company, and recently they said Chrysler isn't worth anything at all.
BRAND: And this is by March, right, that they have to prove that they have this viability?
LANGFITT: They do. They have to put a plan together by March. I think they have to submit it sometime in February, and then the administration needs to make a decision towards the end of March.
BRAND: Any room, Frank, in this plan for some wiggle room?
LANGFITT: There is a little bit of wiggle room when you read through the contract. For instance, it says if the firms can't hit these benchmarks that I just mentioned, they need to make the business case that they can still be viable long term, and it would be up to the car czar to, kind of, decide if they are. But that means that if they can't make the provisions, they're going to have to make the case to the government, and frankly, the American people, that they're still making the tough cuts to go forward.
BRAND: Now, you say there are lots of conditions, especially for the workers, but also for the owners of these companies, conditions that the banks weren't subject to for their bailout.
LANGFITT: That's true. It's very different. You know, when the banks got their money, there weren't a lot of strings attached, and part of that, I think was because the financial system was at threat. In this case, manufacturing is tough. It's going to tough on the economy, but doesn't have the same import if it declines a lot more.
BRAND: NPR's Frank Langfitt, covering the federal bailout of the U.S. auto industry. Frank, thank you.
LANGFITT: Happy to do it, Madeleine.
COHEN: For more on this story, we go now to Detroit. That's where reporter Celeste Headlee has been gauging reactions to today's announcement, and Celeste, you've been speaking with some autoworkers. What have they been telling you?
CELESTE HEADLEE: Well, it's a kind of a mixed reaction. It has been so long coming that I expected a little more jubilance, I guess. But it's coming at a very tough time for the auto industry. And as people may have heard, there are companies - GM and Chrysler - that are closing plants. They are closing them all the way through Christmas and some of them into February. So, people are happy. They're relieved that the bridge loans have finally come through. But I think there's still a lot of tough work ahead, and people are not quite ready to dance in the streets.
COHEN: Celeste, have you gotten any sense of how workers there are reacting to these conditions that have been placed on this bailout?
HEADLEE: I think, on the whole, people are irritated. People are upset that the autoworkers and the automakers have been put through so much when the bailout for the financial industry came with, seemingly, no strings at all. At the same time, it has been such a long process for them, and many of them today describe it as grueling. One said that he felt like he's been in the trenches every single day. So, I think that they've known that they were going to come with strings, they knew it was not going to be easy, and everyone is kind of resigned and ready to make the changes. They say they're ready to make the changes that need to be made.
COHEN: $17 billion certainly seems like a lot of money, but is there any sense from the folks that you've spoken with, do they think it's going be enough?
HEADLEE: You know, they don't know, and I asked several people that very question, and one man's response was, I have no idea; I'm just an hourly worker. At this point, I think people are just trying to get through one day at a time, and they know that without these bridge loans, that next day would not be coming. Everyone who works in the industry knows just how close the automakers are to teetering over that edge. So, I don't think anybody really knows if it's going to be enough. They're confident that the automakers have good plans in place, and they're just hoping the economy turns around and people start to buy cars.
COHEN: You mentioned how long of a process it's been to get to this point. How are people feeling about that process and how it went?
HEADLEE: There's a lot of anger towards the legislators in Washington. And there's also - I spoke with - every person today expressed a lot of surprise that it was the president that came through. For the autoworkers, they have not seen President Bush as somebody who really supports the industry or they did not expect him to be the one reaching out a hand of assistance. So, there was a lot of surprise that he came through, pleasant surprise. But I have to say there's a lot of burning, lingering resentment toward our lawmakers.
COHEN: Reporter Celeste Headlee speaking with us from Detroit, Michigan. Thank you, Celeste.
HEADLEE: Thanks, Alex.
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