The Detroit 3 CEOs and UAW President Ron Gettelfinger blew their chance to make their case in testimony yesterday before the Senate Banking Committee.
They were speaking not only to the senators gathered in inquisition, but also to a broader public wary of continued Washington bailouts of the high and mighty. This was their pulpit to offer an impassioned plea for why the auto industry matters and why America needs to prop up -- if only briefly with a bridge loan -- an iconic industry.
Instead, they mostly droned through their talking points. At times, they seemed unwilling to share their financial books with what soon could become their largest single creditor.
Asked how they would repay a loan, their answer amounted to: “Trust us. We’re trying.” There was a sense of need, but not of sacrifice; of desperation, but not of a goal in sight.
If the American Cancer Society asked for funds this way, there’d be no hope for a cure.
Even before the hearings opened, the issues had been widely debated.
Give ’em the money: Jobs are at risk. A depression, too. A healthy auto sector is critical for national security.
Don’t: Do this, and every industry will line up at the federal trough. Go for Chapter 11, so they can tear up union contracts and state laws that keep them from shedding dealers. Their business plan is flawed, and they have no real alternative.
But that was the problem with the auto executives’ performance. The issues were known. Repeating them wasn’t enough. These managers needed to manage the debate. They needed to convince senators with fresh thinking.
The hearings held no new ideas, no bold calls to action and no stunning vows by the CEOs to put their reputations and wallets on the line.
At the end of this long political year, the testimony came across like a campaign debate in which the public, seeking a burst of insight that would sway opinion, got only stump speeches.
Here are specific notes and reviews of their performances before the Senate committee:
Ford Motor Co.’s Alan Mulally was the only one who appeared at ease speaking to often-critical politicians. His time negotiating with state-run airlines while at Boeing Co. was a clear advantage. It also helped that he had a story to tell; Ford’s plan to bring fuel-efficient cars to the United States from Europe was pushing ahead, and Ford was profitable in the first quarter. Then the wheels came off when credit evaporated.
The others were stiff.
Who invited Peter Morici, a business professor at the University of Maryland, to join the Detroit delegation? This guy defended the auto industry’s importance -- and then said that Chapter 11 is the way to go because it will allow the carmakers to break the union. Otherwise, they’ll be back asking for more money and eventually fail anyway. Yes, foreign countries manipulate their currencies, and poor government policies toward manufacturing haven’t helped. But the real villains of his world all wear union jackets.
If I were Ron Gettelfinger, I’d think this was a setup.
Asked how they could guarantee they’d repay any loan, Chrysler LLC’s Bob Nardelli whiffed. “We wouldn’t be here” asking for money if all three CEOs didn’t believe they could, he said.
Drawing on his experience at General Electric, Nardelli could have played the corporate tough guy: “I’ve closed divisions and sold off units that showed no hope,” he could have said. “I know when it’s time to cut one’s losses, and this is not the time.”
Yes, it was a hardball question. Those are the ones you have to hit out of the park.
Gettelfinger’s opening remarks tried to explain how far the union has come in trying to help the troubled carmakers. And he generally came across as sincere. But he lost traction under cross-examination.
Seeking an example of radical change by the union, Gettelfinger cited custodial jobs that are no longer paid high union wages. How do you think most Americans will respond to that?
It may be a big deal for him and the inward-looking UAW, but that example showed that the union is only belatedly moving to get in line with what’s considered normal in America.
General Motors CEO Rick Wagoner had the toughest job. He has become the lightning rod for the anti-bailout forces. They consider him Exhibit A of auto executives who gently applied the brakes as the car careened into the ditch. After his predictable opening remarks, he was roasted by his questioners.
Wagoner came across like he was trying to offer a dire yet somehow upbeat report to a mostly sympathetic board of directors, rather than trying to convince a room of highly skeptical financial backers.
At one point, one senator repeatedly interrupted Wagoner’s responses, demanding a straight answer rather than a three-minute explanation of the problem. It was political one-upmanship. Wagoner didn’t have a chance.
After saying several times that they would have to get back to the committee with requested financial data, the CEOs were asked whether they had applied for the $25 billion in already-approved funds to back their efforts to build more fuel-efficient cars.
Each said yes. “We applied at 8:43 a.m.” the day applications began to be accepted, Wagoner replied.
The snide rejoinder: “You knew that number pretty well.”
To his credit, Wagoner admitted that of GM’s 60 product lines, only half are profitable. Mulally and Nardelli finessed the question, shifting the focus from model lines to brand lines such as Lincoln or Dodge -- and then not answering.
Asked point blank to rate the automakers from the most viable to the most troubled, the UAW’s Gettelfinger barely paused before replying: Ford, Chrysler and GM.
One senator, clearly unimpressed by the responses he had received, said, “My sense is that some of you will not be recommended” to receive the funds. “Ford is doing a good job,” he commented, but GM is “spiraling downward” and Chrysler “barely has a heartbeat.”
Asked “Will you make a pledge that you won’t come back again?” for more federal aid, Wagoner retorted, “If you’ll make a pledge that the economy will turn around by a certain date.”
True? Perhaps. Politically incorrect? Definitely.
Asked whether they would accept, as a condition of the loan, even-tougher fuel economy rules, Wagoner whined, “We are stretching to meet the requirements as they are.” Nardelli was more conciliatory, saying, “We’d be open to those discussions.”
Finally, the last question of the day was devoted to pay. Would the assembled CEOs accept a $1-a-year salary as part of the bailout, the way Lee Iacocca did to get Washington’s loan guarantees back in 1979?
Again, Nardelli stepped up. “I’d be willing to take that,” he declared. The sacrifice would have been better received had it been made as part of his opening statement.
Wagoner was less blunt. “I’d be willing to contribute to that sacrifice,” he said, noting that once before his salary had been cut in half.
Mulally, whose pay last year topped $20 million, also waffled. “We’ve taken an ax on all the salaries,” he said.
Not good enough.
Sen. Christopher Dodd, D-Conn., chairman of the committee and a member whose vote the automakers desperately need, said that in conversations with his constituents about bailouts, whether for the auto industry or for financial institutions, “The only issue they had for me was executive compensation.”