David Pleasant

Senate Banking Committee Hearing

The Senate Banking Committee is holding hearings today on providing government financial assistance to the auto industry. There will be multiple panels appearing before the Committee, the first of which is the GAO led by the U.S. Comptroller General Gene Dodaro. The second panel will consist of executives from the Big Three – Ford, Chrysler, and General Motors.

The Committee requested representatives from the Treasury Department and the Federal Reserve to attend, but according to Committee Chairman Sen. Chris Dodd (D-CT) they refused to participate.

Albeit rough, these are some of the highlights from the hearing thus far.

Comptroller General Dodaro testified that Treasury does in fact have sufficient authority under current legislation (TARP) to provide funds to the automakers. He also testified that the Federal Reserve has the authority to provide funds to the Big Three, although they must meet certain specifications, such as lender of last resort, before the Federal Reserve can provide any funding. Treasury is under no such constraints, other than the terms originally provided in the bailout legislation passed in October. In other words, a timely disbursement of funds could be made to avoid the inherent catastrophes that would be inevitable if one or more of the automakers were to fail in the in immediate future.

Although the Big Three have submitted detailed proposals (GM plan, Ford plan and appendix, Chrysler plan) to Congress on how they would use any funding provided by the government, this is what I gleaned as the main points of their proposals in the hearing.

General Motors

• More fuel efficient vehicles
• Full compliance with 2007 Energy Independence and Security Act
• $4 billion now and up to $18 billion
• 9 plant closures by 2012
• Up to 30,000 job cuts

Ford

• More hybrid and electric cars
• 14 percent increase in fuel efficiency for entire fleet by 2009
• $9 billion line of credit to be used depending on sales
• $1 per year CEO salary

Chrysler

• New fleet offering 24 types of hybrid vehicles by 2012
• $7 billon by end of December to be used depending on sales
• $1 per year CEO salary

Again, this is just my rough interpretation of what has been presented in the hearing thus far, but it is clear that the job cuts and plant closures offered by General Motors are in stark contrast to the perceived intent of Congress and President-elect Obama – saving jobs of thousands if not millions. Chrysler and Ford appear to have more forward-looking plans to revise the industry to be more competitive and save, if not create jobs.

Late Update: I should note that I have not read the detailed plans submitted by the automakers to the Committee, therefore, there may be some contradiction in the terms proposed and what I have gleaned, in summary, during the hearings thus far.