By Mike Caggeso
As the Senate meets today (Monday) to discuss what to do with the eviscerated U.S. auto industry, some strong words from one of the Senate's most powerful member suggested a much-debated bailout could come with some strings attached for top executives.
"It is not my job to hire and fire, but what I'm trying to suggest is that you need to have new teams in place," Sen. Christopher Dodd (D-Conn.), chairman of the Senate Banking Committee, said today on "Good Morning America". "If you are going to restructure a company you can't be asking the people frankly, many who were involved in creating the problems we're in, to be involved in restructuring."
That's just one of several possible strings attached to a bailout to the Big Three – General Motors Corp. (GM), Ford Motor Co. (F), and Chrysler Corp. The first is that the $34 billion requested could be turn out to be about $15 billion. Another could be forcing GM to cancel its long-established dividend. (Ford suspended its dividend last year.)
Another could be additional concessions from the United Auto Workers union, Reuters reported.
Another possible change that will no doubt garner some attention is the creation of a government-appointed "car czar" to oversee the bailout. The New York Times reported Sunday that Democrats were drafting legislation that would call for the strict government control of a czar-controlled oversight board comprised of five cabinet secretaries and the head of the Environmental Protection Agency.
Whatever concessions are on the table,, the Associated Press reported.
"It sounds like we have agreement on those basic principles that would be required for a bill that the president could sign," White House press secretary Dana Perino told reporters today.
So far, the carmakers have proposed a wide range of changes to help persuade lawmakers to approve the bailout money, the carmakers proposed a wide range of changes. Among the highlights:
- Executive salary cuts: Ford announced that the salary of Ford CEO Alan Mulally would be cut to $1 a year if the firm actually borrowed money from the government. General Motors said that Wagoner, the CEO, also will accept a $1 salary. Chrysler's Robert "Bob" Nardelli is already being paid only $1 a year, according to the Chrysler plan. Mulally had a base salary of $2 million and total compensation of $21.7 million last year, according to the company's filings. Wagoner received base pay of $1.6 million and total compensation of $14.4 million. Closely held Chrysler does not disclose executive pay.
- Financial restructuring: GM intends to renegotiate its outstanding debt with lenders and bondholders. As of the third-quarter's close, the firm had more than $30 billion in unsecured debt. GM said it anticipates making all of the roughly $28 billion in payments it owes its suppliers.
- Product streamlining: As part of its cost-cutting efforts, GM suggested that two of its brands – Pontiac and Saturn – could be dropped from its product mix. Pontiac – known in the past for such cars as the Firebird, Trans-Am and GTO – could become a niche brand sold by other dealerships. GM would look for alternatives for dealers of the Saturn, which revolutionized the industry with its no-haggle pricing policies. The company has already said it was considering the sale of its Hummer vehicle line.
- Union concessions: GM intends to seek additional changes in the labor contract it has with the United Auto Workers union – enabling it to modify retiree health care plans and job guarantees the company says it can no longer afford. Money Morning previously reported that national union leaders with all three of the U.S. automakers are planning to hold an emergency meeting in Detroit today (Wednesday).
- New alliances: Chrysler, which a year ago was sold by German automaker Daimler AG (DAI) to the U.S. private equity group Cerberus Capital Management LP, said it remains focused on "developing partnerships, strategic alliances or consolidations" as part of its long-term plans. Chrysler leaders say the firm could save between $3.5 billion and $9 billion a year if it merged with another automaker. GM last month said that it had halted discussions about a possible combination with Chrysler to focus on its own turnaround efforts.
- More hybrids, no corporate jets: Each of the Big Three pledged an accelerated introduction of hybrid vehicles. Ford yesterday promised to put "a family of hybrids, plug-in electric vehicles, and battery-electric vehicles" on sale by 2012, BusinessWeek.com reported. The specific plan calls for a battery-powered electric commercial van in 2010 and a battery-powered retail sedan in 2011. The company is also believed to be developing plug-in versions of its Focus and Fusion cars by 2012-2013. By 2010, Ford said 80% of its investments will be in cars and so-called "crossover" vehicles-as opposed to trucks and SUVs. That's up from 60% in 2007. Ford and GM also announced plans to get rid of corporate jets. Mulally, Wagoner and Nardelli were all criticized at a House hearing last month – and ridiculed in the media afterwards – when they admitted they had each flown their corporate jets to Washington to ask for rescue money. According to CNNMoney, Ford promised to sell its five corporate jets, while GM vowed to sell four of its seven – and to transfer the leases on the remaining three to another operator. Chrysler spokesman Ed Garsten says Chrysler does not own any private aircraft but instead leases them on an "as-needed" basis. The CEOs apparently learned their lessons well, albeit a bit late: When they return to Washington to beg for the loan money later this week, Mulally and Wagoner will be wheeling hybrid vehicles made by their companies; Nardelli will also drive a hybrid in his return to Capitol Hill, published reports state.
Not on that list: Replacing current CEOs. And GM said putting Wagoner on the chopping block isn't a constructive solution, despite Dodd's suggestion.
"GM employees, dealers, suppliers and the GM board of directors feel strongly that Rick is the right guy to lead GM through this incredibly difficult and challenging time," GM spokesman Steve Harris told the AP.
News and Related Story Links:
New York Times:
Detroit Bailout Is Set to Bring on More U.S. Oversight
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