Economic Aid To Auto Industry

Mr. SPECTER. Mr. President, I have sought recognition to discuss the issue as to what Congress should do, if anything, with respect to economic aid to General Motors, Ford, and Chrysler. This is an issue which has been very much in the news, with the prospect that one or more of these companies might not survive--probably would not survive--in the absence of some aid from the U.S. Government.

Last Tuesday, I convened a meeting in Philadelphia attended by key executives from each of the Big Three, labor leaders, the head of the Pennsylvania AFL-CIO, the head of the Pennsylvania United Auto Workers Community Action Program, and the head of the Philadelphia Labor Council. Also in attendance were dealers, suppliers, and economists to review the situation, to get a background, to understand it better, to provide for the consideration this week of the issue which will be before the Senate.

At that meeting, the Big Three painted a very gloomy picture. Ford was in the best position of the three, having arranged credit some time ago, and they had a request pending for some $9 billion in standby aid. They were not asking for it, but only want it available in case their situation came to the point where they actively needed it in order to survive. The CEO of Ford said that if the $9 billion was requested and received, he would then serve for a dollar a year.

The projections from General Motors and Chrysler were considerably gloomier than Ford, with the statements made that if they did not get aid by the end of the year, they might have to go into bankruptcy, or to Chapter 11 bankruptcy proceedings. The suppliers were very concerned about the impact on their situation. The auto dealers were similarly concerned. Labor is very worried about the loss of jobs. So it was a very gloomy meeting overall.

On Thursday, I convened a meeting in the Lehigh Valley. We did not have representatives of the Big Three, but we did have labor locally, dealers, bankers, economists who evaluated that situation. I joined with Senators LEVIN, STABENOW, BOND, VOINOVICH, and BROWN on November 20 in endorsing legislation to assist the Big Three, to say that it is something I would be willing to consider in light of the projected difficulties and the ripple effect it could have on the economy.

My statement in the news conference which we held and a statement on the Senate floor was that my view was limited to consideration of such economic aid conditioned on the Big Three having plans to move forward which would present the realistic likelihood that they would be able to succeed. Considerable attention was given in the meetings which I held last week in Pennsylvania to the alternative of bankruptcy, and there have been many who have said bankruptcy would be the appropriate course as bankruptcy proceedings were held with the steel industry and the airlines, and that was the way to resolve the issue if the Big Three could not survive. One point which all of the Big Three agreed upon was that if one failed, they were all going to fail.

The considerations with respect to bankruptcy which were considered at the two meetings I held were the contention that bankruptcy would be unacceptable to have the survival or having the Big Three come out of bankruptcy because of the difference between the automobile manufacturer situation contrasted with the steel industry or with the airlines. When buyers are looking for a car or looking for a warranty, they expect the companies to be in existence for protracted periods of time, so that the argument was made that Chapter 11 proceedings or bankruptcy generally would not be acceptable.

I commented at these meetings, as I did on the Senate floor and in the news conference which the six Senators had on November 20, that the public sentiment is very much opposed to bailouts. After the $700 billion legislation was passed on October 3, I traveled the State of Pennsylvania and had town meetings. I found the temperature of my constituents was at the boiling point, 212 Fahrenheit, and, in fact, the thermometers were broken. I commented to the town meeting attendees that the vote which was taken in the Senate was a strong vote--74 to 25--which was a very strong vote, because of the potentially catastrophic consequences of what would happen to the economy. We didn't like the bailout of Bear Stearns or the bailout of AIG, and Lehman Brothers was not bailed out, and there were major regulatory problems which would be addressed by the Congress. Those who had made false representations on the balance sheets saying that the companies were worth falsified figures, knowing them to be false--that is fraud--and there were investigations, criminal investigations underway, and that as in the Enron situation, people could go to jail for making those false representations. But I make that comment because of the public view which is opposed to the so-called bailouts; that it ought not to be the Government which picks winners and losers, but it ought to be the market which picks winners and losers. I repeat what I have said in prior floor statements which is that the Big Three have a very steep burden of proof and that the Big Three will have to come up with a plan which is reasonably and realistically calculated to succeed. We are now talking about various oversight provisions, talking about limited compensation, golden parachute plans which will make the Big Three competitive in a very difficult market, and taking a look at the drastic reduction of automobile sales. But one factor came through loudly and clearly, and that was the potential consequences if the automotive industry--the Big Three--collapse, that we would be without the major portion of the industrial base in the United States, which as we all know in time of national emergency, in time of war, is indispensable for the defense of our country.

So my staff and I and my colleagues are all taking a very close look at the proposals which the Big Three have made. I had a request to meet with General Motors and we will be doing that tomorrow. We are talking to a lot of people who were totally opposed to economic aid from the Federal Government. So we have to weigh the consequences as to what happens if economic aid is not given. It is hard to calculate what the consequences will be on the economy, but some of the predictions are virtually catastrophic. We must weigh that against the likelihood of the success of the plans, and it all depends on the quality of those plans.

I thank the Chair. I know Senator Dorgan is close at hand, but in the absence of any other Senator seeking recognition, I suggest the absence of a quorum.

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