Statement of Senator Mike Enzi
On Recent Proposals to Provide Funding for Domestic Auto Industry
December 11, 2008
Nearly one month ago, the “Big Three” domestic automakers General Motors, Chrysler, and Ford came to Washington, DC to ask for taxpayer money to sustain their business model. They came to Capitol Hill on separate jets to make their case to me and my other colleagues on the Senate Banking Committee as to why they thought their failing businesses should be bailed out by taxpayers. At this first hearing, they had NO plan other than asking for a $25 billion check. I said, "If this package were taken to a local banker by a small business with a request for $25,000, the banker would turn the applicant away to come up with an actual business plan." Small business owners jump through more hoops for a few thousand dollars than the auto industry is for a few billion. The auto industry with their experts and analysts should know better and do better. Both houses of Congress sent them back to do just that.
They returned in December, this time by car, asking for $34 billion in order to avoid bankruptcy. This figure bounced around both houses of Congress and the White House, and eventually it was decided during closed-door negotiations that the automakers should receive $15 billion immediately, with a promise of more to come if they remained in trouble by March, 2009. This number was determined to be adequate despite congressional testimony from financial experts that the Big Three may need up to $125 billion to prevent bankruptcy.
During the hearings in November and December, the Big Three auto executives blamed the economy for their problems. However, the problems experienced by domestic automakers began long before the economy began to falter. Burdensome pensions and health care liabilities, high infrastructure costs, and a shrinking market share have plagued these businesses for decades. Meanwhile, other car companies have found a way to maintain successful US operations in the face of a declining economy. Responsibility needs to be first taken for years of unsustainable business practices. Instead, they are looking to the taxpayer to bailout their bad decisions. I cannot support such irresponsible behavior.
We should be encouraged that the auto makers are working on a long-term strategy. They presented some ideas for a sustainable domestic auto market this week. I have been examining the new information closely. However, this plan continues to lack the details and clear plan with measurable goals and a reasonable chance for success.
Congress’s plan has similar problems. Creating a “Car Czar” to oversee the operations and management of the Big Three is not going to save them from failure. The highly paid auto company executives and economists have tried to do this for decades. The “car Czar” title may be catchy and cute, but what makes my colleagues believe a federal bureaucrat will be more successful in managing a multi-billion dollar company? Many of you may have heard the saying that if you think the problems the government creates are bad just wait until you see its solutions. This, I fear, could be the very manifestation of that saying. We need to provide the Big Three with the flexibility necessary to drastically change their business models, not continue to fund a failing ones.
One of the most positive suggestions so far came from Senator Bennett of Utah. Money from the $700 billion Emergency Economic Stability Act was intended to be spent on purchasing "toxic housing loans". Instead it went to bailout financial institutions who used the money to buy other banks and to pay dividends to stockholders. Sen. Bennett suggested the Department of Treasury should make those banks loan the automakers the money, with a partial government guarantee. This strategy would limit additional expenditures and require banks to continue lending instead of holding onto the money provided in the EESA. These are the types of ideas that merit serious consideration by this body. Unfortunately, they have not been debated because Congress is instead rushing to pass a $15 billion handout for failing companies.
To give anyone confidence in the future of the Big Three, the automakers will have to find ways to restructure their business model. They have to build a long-term plan for success before seeking billions of dollars in a taxpayer-funded loan. After studying the proposals before Congress, I remain convinced that a multi-billion dollar bailout alone is not the answer. Unless a final plan is presented to us that is accountable and financially sound, I will vote on it the same as I have on previous bailouts – no.
Times are tough right now and they’re getting tougher. A failure of the auto industry would have a negative effect on America and Wyoming. However, I worry that putting taxpayers further in debt with a series of big-ticket bailouts will actually do more damage to our overall economy in the long run. There are things Congress can do to help, but it is very important that what we do has a reasonable chance of success and targets the heart of the problem. I do not want to throw federal IOUs at every problem just to say we did something.