Pelosi: bailout carries a stiff price
Two key Democratic administration players sent a clear if contradictory message over the weekend to Chrysler and General Motors that they must radically reshape themselves by making profits while cutting costs and preserving jobs and benefits. This of course is what Chrysler, General Motors and Ford have been trying to do for years with little success.
In a letter, just released, Speaker of the House Nancy Pelosi and Financial Services Chairman Barney Frank wrote to Robert L. Nardelli, Chairman and CEO of Chrysler, and Rick Wagoner Jr., Chairman and CEO of General Motors. In it they insisted that their company restructuring plans due tomorrow must “demonstrate to the world that you are willing to make the tough decisions that modernize your operations, restructure your debt, enhance your competitive status in the global marketplace, and protect American jobs for the future.”
Pelosi from California and Frank from Massachusetts also demanded that the struggling companies demonstrate they can meet the fuel efficiency requirements set forth in the Energy Independence and Security Act of 2007 that requires a combined fleet average of at least 35 miles per gallon by model year 2020.
The liberal Democrats also want agreement that the companies will meet pending carbon dioxide emissions standards adopted by California and other states that were stalled by the Bush Administration if they receive Federal approval. The California standards are expected to require higher mileage vehicles sooner than the existing Federal standard. If so, it would require massive amounts of capital and engineering time from the broke companies. It could also have the unintended effect of keeping small vehicle engineers employed in Europe and Asia while U.S. engineers who formerly worked on trucks are fired.
Pelosi and Frank want competitive information including a target market size at a time when no one knows what size of the market will be because of the ongoing economic collapse. Assurances must also be made that taxpayers will benefit as corporate conditions improve and shareholder value increases. And if that’s not enough also required is commitment to protecting and sustaining the health and pension benefits that have defined “quality” American jobs and allowed millions to enter the middle class.
How the companies can cut costs, while investing billions in fuel efficient technologies while preserving jobs and maintaining health care and pension benefits remains to be seen.
Pelosi and the House of Representatives last December passed legislation that authorized taxpayer assistance to the auto industry. This legislation, which the Senate failed to pass, served as model the Bush Administration’s December initiative to provide $13.4 Billion in loans to the automobile industry from the Troubled Asset Relief Program.