"Bush won’t take the fall for Detroit’s fall"
The NYT reports:
President Bush announced $13.4 billion in emergency loans on Friday to prevent the collapse of General Motors and Chrysler, and said another $4 billion would be available for the hobbled automakers in February. The entire bailout is conditioned on the companies undertaking sweeping reorganizations to show that they can return to profitability….
The decision to use the stabilization fund was also a major turnabout for Mr. Bush, who for weeks had insisted that the Treasury program should not be used to help the automakers.
In the end, it was clear that Mr. Bush did not want G.M. or Chrysler, both American icons, to go down on his watch.
I guess losing New Orleans, America’s good name, our civil liberties, the credibility of the constitution and of the Justice Department (and the SEC and every other watchdog agency), the health care of millions of people, rising wages for most Americans, the housing industry, the financial sector, the economy in general, the climate for the next thousand years, [insert your W-driven calamity here], was enough for the President. I know it was enough for the rest of us.
Bush has punted this problem, and all the others, to Obama:
“These are not ordinary circumstances,” Mr. Bush said in televised remarks that quickly touched off a debate over the fairness of his plan. “In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action.”
Mr. Bush made his announcement a week after Senate Republicans blocked an automaker bailout that had been negotiated by the White House and Congressional Democrats. The loan package announced by the president includes requirements that are roughly identical to those in that bill, which was approved by the House.
But House Speaker Nancy Pelosi said the White House package “unfortunately singles out workers and clearly puts them at a disadvantage before negotiations have even begun.” Other reaction cut across political lines, with some Republicans criticizing the White House, while other Republicans from states dependent on the auto industry offered praise….
A close reading of the package announced by Mr. Bush shows that it is different from the legislation adopted by the House in a crucial way: it strips away a requirement that Cerebrus Capital Management, the private equity firm that owns 80 percent of Chrysler, be held liable for any losses experienced by the taxpayers. Lawmakers in both parties have expressed outrage that Cerebrus, which is profitable, had refused to put up any more cash to aid Chrysler .
The bill adopted by the House would have allowed the government to reach up through Chrysler’s complicated corporate structure and take an equity stake in Cerberus itself, essentially requiring Cerberus to make the taxpayers whole should the government incur losses.
The fund agreed on Friday to put another $2 billion into Chrysler. Administration officials said the investment effectively put Cerberus on the hook for far more than just the government loans, and that taxpayers were being protected through the tough restrictions imposed in the loan agreements — including provisions that would give the government an equity stake in G.M. and Chrysler.
“They carry all of the risk,” Tony Fratto, the deputy White House press secretary, said of Cerberus. “We are limiting risk and expect to be paid back.”
The loan deal requires the companies to quickly reduce their debt by two-thirds, mostly through debt-for-equity swaps, and to reach an agreement with the United Automobile Workers union to cut wages and benefits so they are competitive with those of employees of foreign-based automakers in the United States.
The union president, Ron Gettelfinger, said, he was disappointed that Mr. Bush added conditions singling out workers.
“We will work with the Obama administration and the new Congress to ensure that these unfair conditions are removed,” Mr. Gettelfinger said.At a news conference in Detroit, the chief executive of G.M., Rick Wagoner, said, “We’ve got a huge amount of work to do over the next 90 days and beyond, so our focus is on executing our G.M. plan.”
“We obviously have to deliver on our plan, but we’d like to get more focus back on what we think is a very competitive set of cars and trucks that are competitive in fuel economy and quality and in most cases have better designs,” Mr. Wagoner said.
In a statement to employees, Robert L. Nardelli, the chief executive of Chrysler, said the company would hold up its end of the bargain.
“The receipt of this loan means Chrysler can continue to pursue its vision to build the fuel-efficient, high-quality cars and trucks people want to buy, will enjoy driving and will want to buy again,” Mr. Nardelli said….
To gain access to the loans, G.M. and Chrysler must agree to concessions, including limits on executive pay and the elimination of private corporate jets.
Yet Mr. Bush essentially handed off to President-elect Barack Obama what will become one of the first, most difficult calls of his presidency: a political and economic judgment about whether G.M. and Chrysler are financially viable. (Ford is not seeking immediate government help.)
If, by March 31, Chrysler and G.M. cannot meet that standard — and clearly they could not meet it today — the $13.5 billion in loans would be “called” for immediate repayment, with the government placed ahead of all other creditors.
In effect, the White House has required the auto companies to cut the equivalent of $13.5 billion in costs within three months, in order to repay the federal money and receive another infusion of capital that will either keep them operating for the rest of the year outside of bankruptcy protection or provide financing while they reorganize in bankruptcy.
That is an enormous amount of savings to find in such a short period, industry analysts said, especially given the bleak conditions under which the companies are operating. Auto sales are the worst since the early 1980s, and there has been no sign that banks or the car companies’ financing arms will loosen tight restrictions on loans.
To avoid bankruptcy, the companies will need to complete negotiations with unions, creditors, suppliers and dealers by March 31. Any judgment on the accords they reach with those groups will inevitably be both economic and political….
Mr. Bush chided Congress for failing to approve the auto rescue legislation, but he did not note that his fellow Republicans in the Senate were responsible for scuttling the bill in what amounted to a sharp rebuke to the White House in the waning days of his administration.
Is there anybody left in the entire country who thinks the president has done a good job?