PRESS CONFERENCE WITH SENATE REPUBLICANS ON THE AUTO BAILOUT
PARTICIPANTS: SENATOR RICHARD SHELBY (R-AL); SENATOR JOHN ENSIGN (R-NV); SENATOR DAVID VITTER (R-LA); SENATOR TOM COBURN (R-OK); SENATOR JIM DEMINT (R-SC)
SEN. SHELBY: Good afternoon. Some of us have been in a meeting with other senators, trying to find out what's going to be in the final details. I understand that they've sent an electronic copy up to the Banking Committee and to other offices. But we haven't seen all of it.
But what I've seen thus far -- some of it -- I think that it's a travesty. I think this bill basically was -- you can see the influence of the UAW and you can see the influence of management of General Motors, Ford and Chrysler. This is the installment on a huge bailout that will come later. And of course, I'm going to oppose this, barring a real strong alternative. I would not support this kind of legislation.
I believe that, later today, if they bring this bill either to the House or to the Senate, that a lot of us are prepared to talk about this bill, to explain the merits and demerits of it to the American people. And that's why we're here today. And everybody will have their own view of things, but my view is that this will not make Chrysler, General Motors or Ford competitive.
You're talking about $15 billion. This is only the down payment. We had testimony last week by one noted economist it would be 125 billion (dollars). Other people say more.
Unless Chrysler, Ford and General Motors become lean and innovative and competitive in the marketplace, this is only delaying their funeral. I want them to survive, but they have to make that decision. They can strip down. They can become competitive. They can save thousands and thousands of jobs. But this proposal that I've seen thus far will not do it. And I intend to talk to the American people about it from the Senate floor.
SEN. ENSIGN: First of all, we all understand that the American economy is hurting and the auto industry is hurting right along with that.
We've -- you know, I'm in a state where there's probably no worse as far as the economy is concerned. We're seeing across the board not only our auto dealerships are having trouble selling cars; obviously, we lead the country in the rate of foreclosures. There's a lot of of bad things happening in the economy. And we're concerned about people's jobs.
But we also have to be concerned about the taxpayers' money. And to take billions of dollars to bail out the auto companies when the forced restructuring is not in place to make sure that they come out healthy at the other end, where they can compete with the Japanese, the Japanese that are building cars in America, the Germans that are building cars in America, if we don't have the forced restructuring plans in place, many of us don't believe that American car companies will come out of this in a competitive position, and the taxpayers' money will be wasted at that point and it will take a lot more money.
So, up front -- and I think this is pretty obvious -- when GM, Ford, Chrysler, their management teams have not been able to run their companies, obviously, very well, how does anybody expect some car czar or some politician to be able to make the decisions that are right from a business standpoint for these car companies?
We have restructuring experts in the United States. Chapter 11 reorganization, many companies have done that before. This is certainly an option for the auto companies if the government can guarantee the warranties. That's been the biggest argument from the auto companies, is, nobody's going to buy our cars if we're in reorganization plans.
But if the government is there -- and you can buy third-party warranties, you can do all kinds of things -- but if the government is there, with the full faith and credit to guarantee these warranties, that takes away the argument from the auto companies. And then in a reorganization, the companies can come out leaner, more efficient, and literally hundreds of thousands of jobs can be saved in the United States and make us have a stronger manufacturing base going into the future for the United States of America.
SEN. COBURN: I'd just say I think our goal ought to be to do what is in the best long-term interest of the American people as well as the auto companies. And what is written as of now will not achieve that. You know, it's interesting that in 2007, GM sold 9.37 million cars worldwide.
Toyota that same year sold 9.37 million cars worldwide. GM lost 38.7 billion (dollars). Toyota made 17.7 billion (dollars). Therein lies the problem.
And what we're about to do is to solve a short-term problem to create a much bigger long-term problem. Nobody wants anybody to lose their jobs. But the fact is, this doesn't fix the problem. It exacerbates the problem in the long term.
SEN. VITTER: Well, I join my colleagues in opposing this bailout plan, and for me, it's for two very simple reasons.
Number one, for these companies to survive, they need to go through fundamental, truly core restructuring. And this plan is not that. This plan is giving them $15 billion, and then after $15 billion they would begin to develop a detailed plan. That's putting the cart before the horse. And that's relieving pressure off the demand that they go to the core and restructure in a fundamental way. That's not making them do it.
Number two, I agree with my colleagues that this plan politicizes their management even further, moves their management in the wrong direction right when they should be making decisions purely on business and engineering. It's politicizing the process, maybe with the car czar, maybe with mandates that they can't dispute certain environmental regulations coming from different states, et cetera. So that's moving them in the wrong direction too.
Again, like my colleagues, I don't want anyone to lose jobs. I recognize that if they fail, it would be a serious hit to individual workers and families and the economy. That's why I oppose this plan. I don't oppose it in spite of that. I essentially oppose it because of that, because this plan will really, in my opinion, doom them to failure by not demanding the core fundamental restructuring which is necessary for them to survive.
SEN. DEMINT: I've driven American cars all my life, and I want to continue driving American cars, and that's why I'm opposing this bailout. There is no political solution to the problems that the American automobile companies are facing right now.
This is a business and financial problem. We have laws -- bankruptcy, Chapter 11 laws -- that were designed to allow companies that are in financial trouble to restructure in a way that they could come out on the other side healthy.
The argument that's being made today is that people will not buy a car if a company is in bankruptcy, is a bogus argument. Americans are not stupid. They know that this bailout is only a temporary solution. They're much less likely to buy an American car with this bailout plan than they would under a prepackaged bankruptcy solution where people knew that that -- we were coming out of the other side of this with healthy American car companies.
We need to let the market fix this. This is not a political problem. It's a business problem, and once we allow them to restructure, they can come out on the other side. We can save the maximum number of jobs.
SEN. SHELBY: Any questions? Quickly.
Q (Off mike) -- Senator Shelby, are you going to -- I'm back here --
SEN. SHELBY: I can't --
Q (Off mike.)
SEN. SHELBY: Okay, I see you now.
Q Are you thinking of slowing this down and amending it, or killing --
SEN. SHELBY: Absolutely. We plan to slow it down, because we don't even know what's in it. Nobody knows what's in it, other than some fundamental stuff. We just a few minute ago got electronic copies sent to the offices, the Banking Committee and others. I haven't seen all of it. But what I've seen is very disturbing and troubling, because it's a down payment, as I would sincerely believe -- a down payment on billions to come. It doesn't restructure these companies. It doesn't make them competitive in any way. It doesn't make them survive. This postpones the inevitable, and we don't -- we would like for them to survive, but it's going to take courage. I don't know if the management structure can do it.
And they're not making money, as one of my colleagues pointed out. So there's a reason they're not making money. And a lot of people aren't buying the cars, and there's got to be a reason.
Do we want them to survive? Absolutely. But this is a mistake. This is something I hope that we can discuss at length with our colleagues.
Q Do you want to amend this on the floor? (Off mike) --
SEN. SHELBY: Oh, we're going to come with a substitute. Senator Corker is working on that now. He's going to come with an alternative to this that would be tough but will help save these companies. And if people really wanted to save these companies, they would get on board. That's including the management, the workers and the politicians, and including this administration.
Q Senator Shelby --
Q Senator Shelby, in your home state of Alabama you have auto manufacturing plants owned by Mercedes, Honda, Hyundai.
You also have the parts plants --
SEN. SHELBY: Toyota.
Q -- by Toyota.
SEN. SHELBY: Absolutely.
Q Would the failure of the Big Three actually be a good thing for the constituents in your home state of Alabama?
SEN. SHELBY: No. No. No. Failure's never a good thing for anybody. Competition is a good thing. We want these companies to be competitive. There's nothing in this proposal that will make them competitive.
Q Isn't all politics local?
SEN. SHELBY: Well, not in this situation. I think what it is -- this is a big national problem, and this has been going on for 30 years. These companies are not the GM that I knew -- or the Chrysler or the Ford -- as a kid. You know, yourself.
Q Senator, following up on that --
Q Senator, there are five of you up there. Senator Corker makes six. You want to tell us how many friends you have who -- in your conference --
SEN. SHELBY: I think we're going to have a lot more friends than you probably think. I haven't done a count on them. But I believe that we'll have time to explain the demerits of this bill -- and I think there are many -- to the American people and to you.
Q Do you have any fear that the administration -- if this doesn't go forward and pass, that the administration would actually then back up and use TARP funds for the --
SEN. SHELBY: Well, the Federal Reserve could do something right now. You know, they've done -- intervene always in other areas. I'm sure that the administration could do things. But a lot of the things the administration's done through the bank thing, I think, is they've botched the whole deal and I hope they will not botch this.
SEN. ENSIGN: Regarding the administration and the TARP, I think it would be a huge mistake for the administration to use TARP funds. Obviously, all they would have to do is guarantee a bank loan to be able to do that.
And the reason I think that that would be a big mistake is because you're then just piling more debt on these companies. I mean, when you're -- that's one of the things we have to look at. When you look at the total debt that GM has, for instance -- now you're piling more debt on top of them -- it's like a spending addict that you're going to loan money -- more money to. You're not requiring the spending addict to actually address their problem, and that's what the American car companies, especially General Motors, has been. And to pile more debt on top, with -- whether it's TARP funds or whether -- what we're talking about here in this bill, I think is a big mistake because it's not fundamentally being restructured.
The bonds are currently or last week, I think, they were trading at 19 to 21 cents.
And what's going to happen, if government money goes in, those bonds actually increase in value, okay? That's not what we should be about. That's one of the reasons in Chapter 11 that doesn't happen. Reorganization doesn't happen. The bondholders actually have to take what the bonds are actually worth, and that's part of what needs to come to the table. Instead of the taxpayer subsidizing those bondholders, they should get what the value actually is of those bonds.
Q Senator, Senator, the automakers say that they couldn't go through Chapter 11 --
Q Senator, are you saying -- (inaudible) -- asking for a bailout?
SEN. SHELBY: What's your question? Wait a minute. One question at a time. What?
SEN. ENSIGN: Go ahead. Go ahead.
Q Specifically, the automakers say they could not get through Chapter 11 without some sort of extra financing, dispossession financing that they -- (off mike).
SEN. ENSIGN: Sure.
SEN. SHELBY: (Inaudible.)
Q Are you saying you'd be willing to support some kind of government aid on this financing to get them through Chapter 11?
SEN. ENSIGN: All right. First of all, I think that the two things that the government could do -- one is the guaranteeing of the warranties, and the second is the reorganization, debt financing. I think that the government could play a role there, and I think it would be a lot less expensive, simply because then you're guaranteed the restructuring through a Chapter 11 reorganization.
Q (Off mike) --
SEN. COBURN: You know, one other point that needs to be made -- Cerberus Capital has ownership in businesses that generate over $100 billion in revenue a year. And we're going to ask the American taxpayer to come and pay for mistakes they're making as an owner of a company? And there's not anybody out there that is working a 9-to-5 or an 8-to-4 job that's going to say that -- "Yeah, we ought to do that." Cerberus Capital has to experience some pain. Some of their owners of their hedge fund need to lose some money. The American people shouldn't be supporting that.
Q Senator, I think probably their short-term --
Q Senator, are any of the foreign carmakers --
SEN. SHELBY: I just want to remind you of something you probably know. I believe that the total market capitalization -- that is, the value of General Motors and Ford as of a few minutes ago -- is probably around $10 billion -- maybe less, maybe more. It was around 9-something Friday. Now they owe -- we understand that GM owes 62 billion (dollars), and if they're going to borrow more and more, this money will never be paid back. Remember that. It can't be paid back. Unless these companies are materially restructured, as Senator Ensign says, we're wasting our time to try to keep them alive.
Q So is there any kind of short-term solution that you all would support right now in order to do a comprehensive solution --
SEN. SHELBY: Yes.
SEN. ENSIGN: Yes.
SEN. SHELBY: Yes. Yes. I would support a restructuring. They can do this, and they can do it fast. The unions and management could get together with the bondholders and everybody else, and they could do it. But that's not what they want to do. They want to make sure they get the first installment on the taxpayers' money.
Q Senator Shelby, have any of the foreign carmakers in your state contacted you about this? (Off mike.)
SEN. SHELBY: No, no, absolutely not. You know -- some of you know I've been here a few years, and in 1979, as a freshman congressman, I voted against the Chrysler bailout. I think it was the wrong thing to do. They did pay the money back -- give them credit -- but I thought it was wrong in principle. And if I had five GM or Ford plants in my state, I would oppose this bailout.
Q Thank you.
Q Thanks a lot.
SEN. SHELBY: Thank you.