Detroit automakers face outdated perceptions, foreign influence in Senate

Southern lawmakers lead bill's opposition

Christine Tierney / The Detroit News

WASHINGTON -- Detroit's struggling automakers are in no position to balk at the bailout bill finally making its way through Congress, but it offers them far less than what they'd hoped to get when they appealed to Washington for a financial lifeline.

It provides fewer than half of the loans they requested, sets onerous oversight provisions and, contrary to the U.S. automakers' assertions that they are victims of a global credit freeze, it states that the companies are at least partly to blame for their predicament.

Yet even this scaled-back rescue plan, a compromise hammered out by a lame-duck Republican administration and Congressional Democrats, has run into fierce resistance in the Senate.

After four days of hearings over the past month, the chief executives of Detroit's Big Three automakers were unable to overcome outdated perceptions and resentments about their industry or counter the growing influence of foreign-based automakers with operations in the South. Some of the bill's harshest opponents include Republican senators from southern states with Asian and German auto factories, such as Sens. Richard Shelby of Alabama and Bob Corker of Tennessee.

Congress' Democratic leaders have pushed the legislation forward by warning that the country cannot risk the collapse of an automaker when the economy is shedding hundreds of thousands of jobs every month. "You could end up losing this industry in a few weeks," Sen. Christopher Dodd, D-Conn., the head of the powerful Senate Banking Committee, said this week. "It's that precarious."

Many lawmakers have admitted the only reason they will support aid for the U.S. automakers is to protect the economy. Aside from a few Midwestern legislators, Detroit has few advocates in Washington. Even among the Democrats, many lawmakers don't trust the American auto industry.

"Part of it's tensions over environmental issues, and part of it is the problems with the cars, the same issues that consumers face, that play into the perception of an industry that's stuck in the 1970s and that hasn't moved forward," said Julian Zelizer, a congressional expert and professor of history at Princeton University.

'This is just bailout fatigue'

The ambivalence was reflected in the terms of the bill, which provided only $14 billion of the $34 billion requested, just enough to sustain General Motors Corp. and Chrysler LLC through the first quarter, and imposed many and strict conditions.

Several lawmakers said they were concerned that if they gave the automakers help, on top of the huge sums they approved for struggling financial institutions, every industry would come to Congress seeking relief.

"Part of this is just bailout fatigue," said Larry Sabato, director of the University of Virginia's Center for Politics. "If they had come before the $700 billion Wall Street bailout, they might have been treated differently."

That accounts for the lawmakers' cutting tone during the first round of congressional hearings on a bailout, he said. Legislators ridiculed the heads of GM, Ford Motor Co. and Chrysler for jetting into town to seek handouts. "The private jets became an excuse," Sabato said. "They were looking for reasons not to support this."

Last week, after the auto executives returned to Washington driving hybrid cars and bearing restructuring plans to show how they would become not just viable but greener, too, several lawmakers said they regretted that the automakers had been treated so harshly. "We didn't ask the CEOs of the banks to drive to town, or to come up with a plan on how they were going to spend the money," said Sen. Sherrod Brown, D-Ohio.

Compared with the raucous hearings in November, last week's hearings were more serious and polite.

But some stark differences remained. After listening to the CEOs outline how they planned to become viable companies able to repay the loans, Rep. J. Gresham Barrett pressed them to explain why they hadn't done this before.

"Why now? Why not 10 years ago? Why not 20 years ago?" asked the South Carolina Republican, a member of the House Financial Services Committee.

Lawmakers seemed particularly puzzled by GM's troubles. The largest U.S. automaker has lost more than $70 billion since 2004. Its market share has shrunk by more than half since the 1980s, yet GM is only now agreeing to phase out or sell half of its eight brands.

Many Republicans and some Democrats weren't buying GM CEO Rick Wagoner's argument that the company was about to turn the corner when the biggest financial crisis in decades erupted. "This is not something that happened overnight," said Shelby, one of the staunchest opponents of aid to the Big Three. "This has been 30 years in the making."

Big 3 seen as competition

For Detroit's automakers, who closely identify themselves with the history of the United States and its victories, it was sobering to hear lawmakers from southern states with foreign transplant factories describe the American companies as the competition.

Rep. Tom Price, a Republican from Georgia, mused that taxpayers in his state would be paying to help companies which compete against South Korea's Kia Motors and other foreign-based automakers with activities in Georgia.

Japanese and other overseas automakers have been assembling vehicles in the South since the 1980s, but their supporters have backed them up discreetly till now, Zelizer said. "What's interesting is seeing a more open defense of the Japanese firms."

Shelby said there are 124,000 autoworkers in the South, close to half the number of people employed by Detroit's Big Three.

Foreign automakers have kept quiet throughout the bailout debate. But executives with the Asian and European automakers caution that the collapse of a Detroit automaker would strain a distressed supplier network on which they also depend.

At a press conference Wednesday, Shelby was asked whether his constituents would benefit from the demise of one or more American carmakers. "Failure is never a good thing for anybody. Competition's a good thing," he said. He noted that he had opposed the recent Wall Street bailout and the Chrysler bailout nearly 30 years ago.

Reputations tough to change

Still, Detroit's chief executives appeared to have burnished their reputations during last week's hearings, congressional aides said. The second encounter gave legislators and auto executives an opportunity to dig beneath the surface perceptions and discuss some of the companies' efforts to improve their performance, cut costs and increase their competitiveness.

"The automobile industry was a bit more humble. They realized they needed to make a bailout more politically viable for Congress," Zelizer said.

"The other part of this was that Congress was realizing what not saving this industry would mean," he said. Counting dealers, suppliers and other businesses dependent on the U.S. car companies, the industry provides jobs for as many as 3 million Americans.

United Auto Workers President Ron Gettelfinger, who attended the hearings alongside the chief executives, told legislators the industry has been lowering its costs for years.

"In the past, while people didn't think restructuring has been going on, it really was," he said. "It has been extremely painful."

You can reach Christine Tierney at ctierney@detnews.com.