JIM LEHRER: And next, the U.S. Senate readies action on a rescue plan for the American auto industry. Gwen Ifill has that story.
GWEN IFILL: Under that plan being considered, two of the big three automakers, General Motors and Chrysler, would receive emergency loans. Among the conditions: limits on executive compensation and a ban on dividend payments; the government could acquire preferred shares in the companies; and the president would appoint a car czar to oversee a restructuring of the auto industry
For more on the state of the rescue plan, we turn to Sen. Chris Dodd of Connecticut, the chairman of the Senate Banking Committee, and Alabama Sen. Richard Shelby, the ranking Republican on that committee.
SEN. RICHARD SHELBY (R), Alabama: Thank you.
SEN. CHRIS DODD (D), Connecticut: Good evening.
GWEN IFILL: Sen. Dodd, as we sit here tonight, can you give us an update? Where do things stand on this plan, on this auto rescue plan?
SEN. CHRIS DODD: Well, I think they’re fairly close, Gwen, as I told — they’ve been all afternoon working, the White House and the leadership of the House and the Senate, Democratic leadership, to try and fashion a plan. And I gather that they’re very, very close.
The last I heard a few minutes before coming over here to the studio was that they’re down to maybe one or two issues. And the prediction is that, by this evening, we’ll have a proposal then to offer to our colleagues, Democrats and Republicans in the House and the Senate, for their consideration, hopefully with White House approval. Without White House approval, this won’t go forward.
GWEN IFILL: Sen. Shelby, you have been down on this proposal since the beginning. And Senator Mitch McConnell, your minority leader, has also said today, at least earlier, before whatever has been agreed on tonight has been agreed upon, that maybe this proposal is deeply flawed. Have you seen anything today that changes your mind?
SEN. RICHARD SHELBY: Absolutely not, Gwen. I think it’s flawed in the fundamental way they’re approaching this. One, this is the down payment on a bailout that will go probably into next year; they’re talking about next spring. It’s $15 billion, more or less. It’s a lot of money.
But it’s only the beginning. I’ve said that it’s a bridge to nowhere. It’s a bridge loan. No bank in the United States, no bank in the world would make this loan. They would summarily dismiss it, the application.
So you’ve got to ask yourself, will this solve the big three’s basic problems? The answer is no.
Senate disagreement over details
GWEN IFILL: Well, let me ask you this, Sen. Shelby. You have -- they came and they asked for $34 billion. The proposal is a $15 billion proposal. What would you suggest as an alternative?
SEN. RICHARD SHELBY: I would suggest a pre-structured bankruptcy, something that -- Chapter 11 wouldn't bother me. But if they don't want to do Chapter 11, they could do something similar to Chapter 11, where the government, the taxpayers could guarantee some kind of loans, but they're not willing to do this, where you get rid of the management, where you start all over and you slim down these companies.
These companies can be saved, but they won't be saved with this business model, by this management group and without a lot of concessions.
GWEN IFILL: Sen. Dodd, you have also raised questions about the leadership of these auto companies, and yet here we are, as you suggest, on the verge of some sort of compromise. Is this a compromise that can work, and especially I want you to focus on this idea of a car czar?
SEN. CHRIS DODD: Well, I hope my good friend, Richard, here will take a look at this. And I understand his concern. And, by the way, he's been consistent over his career on these matters dealing with issues involving the automobile industry and others.
But there are three basic questions. One, are these two companies in particular trouble, dire straits? If they do fail, does that have a huge impact, further impact on already a weakened economy? And if that is the case, then should some effort be made to try and restructure these companies the way that they can continue to be viable?
I think the answer to all three of those questions is yes. And what we've done with this proposal, assuming it goes forward, is basically to do exactly what I think Richard has described here.
I don't know of anyone who believes, having looked at a pre-packaged bankruptcy, Chapter 11, believes that's really a wise way to go. We may end up there, Gwen. I'm not suggesting that will never happen. But I think we'd like to avoid that outcome, if at all possible.
One, a bankruptcy court only deals really with creditors. Certainly, you'd have a huge cost of pensions fall on to the American taxpayer, which could be hundreds of billions of dollars. And there has been the suggestion raised that it's awfully difficult to sell a car from a bankrupt company.
So the idea of doing something short of that -- and the czar, to answer your question here -- for lack of a better word here, the words the car czar -- to give and empower an individual to have the ability to do the -- make the kind of decisions that does exactly what you might otherwise be achieving in a bankruptcy proceeding.
Millions of jobs at stake
GWEN IFILL: Sen. Dodd, it sounds like a lot of pressure on one person to punish, to enforce, to force repayment, this president's designee, whoever this car czar would be, how -- and for them to be able to do all of this, what, by the end of March, is that even conceivable?
SEN. CHRIS DODD: Well, we hope so. And, again, it's not one individual. Certainly, there will be an individual, but obviously a team around that helping to make decisions, which is also part of the difficulty.
Members of Congress have certainly certain capabilities. We're not capable of becoming a bankruptcy court in a sense here. We're going to be in session. We have an administration leaving town in about 40 days, 50 days. And we've got a new Congress coming in.
For us to sit back today and walk away from this -- and I know there are those who would like to do that, and maybe that's what will happen in the next 24 hours -- and then we run the risk of losing a major automobile manufacturer in this country, thousands of jobs.
The word last Friday was 533,000 jobs were lost in this country in one month. And certainly none of us want to wake up in January and discover that America no longer has a viable automobile industry.
You know, we talk all the time about how well these foreign companies do. Let me just cite one free trade agreement with South Korea. In that one agreement, all we can do is sell 5,000 automobiles in South Korea. They get to sell 600,000 of their automobiles in the United States.
There are a lot of reasons why our domestic companies are not doing as well, a lot of which is their own fault, but there are other factors, as well.
Competitiveness is main issue
GWEN IFILL: Some of the other factors, Sen. Shelby, people have said is that, in the southern states like yours which have benefited from companies like Hyundai, BMW, coming in, foreign companies, and setting up business there, that there's less sympathy for union concerns, which are driving a lot of the Northeastern states like Michigan, maybe even like Connecticut. How much of that is playing into your thinking on this?
SEN. RICHARD SHELBY: Well, it's not playing into my thinking. We do have a right-to-work law. A lot of the states do. A lot of our automobile industries -- Mercedes in my home county, it's non-union, but they could go union if they'd so desired. You know, they have a mechanism for that.
But I think the bottom line, Gwen, is competitiveness. How can the three automobile companies -- G.M., Ford and Chrysler -- become competitive overnight? They haven't become in the last 30 years -- you know, they're not producing models that a lot of the American people want to buy.
You've got to compete in the marketplace, and they can do it. They can be saved. I want them to be saved, but this is not going to save them.
'Nationalizing' the car industry
GWEN IFILL: I want to ask both of you -- and I'll start with you, Sen. Shelby -- at what point does this sort of government intervention become nationalizing a major domestic industry?
SEN. RICHARD SHELBY: Well, this is the road we're crossing now. If we cross this road now, we're going to be in deep trouble. We're going to have the French model.
You take all the stock -- the value of General Motors and Ford, I believe closed last Wednesday at under $10 billion. And they're talking about $15 billion loans here, our extension of credits, but really we're talking about maybe up to $125 billion or more billion dollars of loan.
If they can't compete now, you've got to look, why can't they compete? Their model is not working. Their management has led them to where they are today.
GWEN IFILL: Sen. Dodd, what about this notion that you are now nationalizing an industry?
SEN. CHRIS DODD: Well, I don't like that idea at all. And I think, as President-elect Barack Obama said the other day, it's hard to cite examples where the government has run private businesses very well. So I don't like this at all. I wish we weren't here at all.
But that's not the choice we have. We're not pundits. Now, we have to cast votes and decide whether or not we're going to step up and do something or walk away from it.
I know the politics of this. You don't have to have a PhD in political science to say no to this and walk away. That's great politics.
But I suspect that same voter who's angry -- and rightfully so -- about the condition of our economy would not want to wake up and discover America no longer produces automobiles.
This is not an easy path. It's going to be difficult, Gwen, to do this, but I think it's worth the effort, worth the try. One out of every ten Americans depends upon a job related to the automotive manufacturing business in this country.
These same companies we're talking about are critical to supply chains. Thirty-five percent of the people who work in the automobile industry work in parts.
So when we talk about this issue, it isn't just Detroit any more than it's just Wall Street. It's small communities.
I've got 325 car dealers; 25 are already gone; 1,000 people in my state have lost their jobs; 700 dealerships around the country have been wiped out in the last six months.
People are hurting in this country. And I think it's nothing wrong with us to try here to set up a structure here to restructure this industry to allow it to compete.
Credit is also a huge issue we're not talking about tonight, but you can't produce a car that's worthwhile if you can't afford to buy it, and people don't have credit today. That's a separate issue.
GWEN IFILL: Sen. Shelby, if there is a deal tonight, will there be the votes? Will Republicans be able -- who object to it be able to stop it?
SEN. RICHARD SHELBY: Well, I hope there won't be the votes, but there could be. I'm not counting votes, but, I'll tell you what, when we get the final details of this tomorrow or tonight, we're going to explain it to the American people as to who benefits from it. And this is, I believe, the first down payment. I think we owe that to the taxpayer.
GWEN IFILL: Sen. Richard Shelby, Sen. Chris Dodd, thank you both very much.
SEN. CHRIS DODD: Thank you, Gwen.