Automakers Are Lining Up Aid, But Just Don't Call It a Bailout

By Jeffrey H. Birnbaum and Sholnn Freeman
Washington Post Staff Writers
Sunday, December 4, 2005

Troubled U.S. automakers and their allies on Capitol Hill are seeking billions of dollars in aid from the federal government ranging from health coverage for their workers to extra tax write-offs for themselves.

They're also asking for one rhetorical favor: Please don't call the requests a bailout.

"I don't view it as a bailout," Sen. Carl M. Levin (D-Mich.) said.

"We're not looking for a bailout," agreed William C. Ford Jr., chairman of Ford Motor Co.

The "B" word has been taboo ever since Chrysler Corp., faced with impending insolvency, sought and narrowly won $1.5 billion in loan guarantees from Washington in 1979 and 1980. The company eventually borrowed $1.2 billion and repaid the loans in 1983, seven years earlier than was required.

Nonetheless, the notion of the American taxpayer saving a company with a large and quick fix has pretty much gone out of style and has not been repeated since, with the exception of loan guarantees to airlines after 9/11. Even though General Motors Corp. and its rival Ford Motor now face serious financial straits, both are studiously avoiding public condemnation by spreading their aid requests widely among many types of government policies.

Taken together, however, the components of their wish list would cost tens of billions -- far more than Chrysler ever dared to seek.

With pleadings that large, breaking the requests into smaller pieces makes a great deal of legislative sense, and industry and labor leaders hope that several relief packages could begin to move in Congress next year. The outlook is uncertain, especially given the size of the federal budget deficit, but auto industry representatives said they were optimistic that at least some of their proposals would succeed.

"The likelihood of some sort of grand solution probably isn't there," said Dennis B. Fitzgibbons, director of public policy in Washington for DaimlerChrysler AG, the firm that was formed when Germany's Daimler-Benz merged with Chrysler in 1998. "But," he added, "there are pieces that people could agree on."

Many, many pieces. In a speech in Washington last month, William Ford urged the government to help domestic automakers by expanding subsidies for companies that make components for gasoline-fuel-cell hybrids and other fuel-efficient vehicles. He also asked for federal money to retrain workers and for tax breaks to help manufacturers outfit old plants with new equipment.

GM has its own elaborate list. It hopes that pension legislation that is wending its way through Congress will tread lightly on heavy manufacturers such as GM. The legislation would strengthen the federal backstop to private pension plans by raising corporate contributions to a fund. The company also seeks health legislation down the road that would unburden it of the huge cost of medical coverage that it now offers its 450,000 retirees and their spouses.

One proposal that's being floated is for the government to provide catastrophic health care coverage. GM has pointed out that the most severely ill patients, the top 1 percent of health care users, account for 30 percent of health care costs. The industry also is interested in revising tort law as a way to alleviate health care costs.

U.S. carmakers also want to persuade the Bush administration to push harder to get the Japanese to raise the value of their currency. The manufacturers assert that Japanese cars sell for thousands of dollars less than they should in this country because the Japanese government unfairly intervenes in currency markets to artificially depress the yen. The Bush administration rejects claims that the Japanese government is manipulating exchange rates.

"We can compete with Toyota, but we can't compete with Japan," William Ford said.

In addition, the companies advocate tougher trade policies that would restrict the import of foreign cars into the United States where possible and would ease entry of U.S.-made cars into other countries. "We could sell plenty [of cars] in Japan if we were allowed to," Sen. Levin said. "We need a president to go after the Japanese to tell them if they don't reduce their barriers that they will find similar barriers to theirs" in the United States.

The car companies are working through several industry coalitions and major trade groups, such as the National Association of Manufacturers, to press their case on various issues. Not all parts of the proposals are likely to move at the same time, auto executives say, but they see an urgent need for at least some assistance efforts to move soon.

Beset by falling sales and rising health care and pension costs, GM and Ford have suffered through a tough year. GM, the world's largest automaker, said last month that it would cut 30,000 jobs and close all or part of 12 facilities. Ford, No. 2 in the United States, plans to announce its own closings and job cuts next month. In figures released last week, both auto giants reported that their November sales dropped, as sales of Toyota and Honda vehicles continued to rise.

One reason the car companies are not pressing for a single infusion of money is that their problems would not be solved by such a benefit. "Their problem is not so much cash flow to get them through a crisis," said Rep. Dale E. Kildee (D-Mich.), who has been a leader in devising relief efforts. "It's more of a structural change in the global automotive market that the auto companies and the auto-parts makers need to cope with."

The assistance that is being sought would address only some of the companies' problems, which range from inefficient factories to consumer preferences for foreign-built cars. Auto executives acknowledge that recovery will depend on their ability to resolve such issues.

Senators and House members have been meeting privately among themselves and with auto company executives for weeks and expect to have further planning sessions. Much of what they will ask for is part of an effort in general to revive what has been a floundering manufacturing sector.

"What we would be doing is common sense -- fighting for a manufacturing base for this country," Levin said. "We have to decide if we want to have manufacturing jobs or [if] we want to put up with losing millions of more jobs."

Michigan's congressional delegation has led the effort to aid the industry, but lawmakers from many other states may be sympathetic: Cars and their parts are made in many areas of the country. The auto industry is directly or indirectly responsible for 13.3 million jobs nationwide, according to a report by the University of Michigan and the Center for Automotive Research, although that includes the U.S. operations of foreign automakers.

Republican lawmakers from regions affected by the auto company retrenchment are joining the drive. Rep. John J.H. "Joe" Schwarz, a freshman Republican from Michigan, has been working on a universal health care plan modeled on federal employees' benefits that potentially would help GM, Ford and DaimlerChrysler unload billions of dollars in annual health care costs for current workers and retirees. "It is wrong to destroy the middle-class dream in America," Schwarz said. "We are going to have to find a way as a country to work our way through this."

But it's not clear how united the industry is. For example, GM cares more about pensions than Chrysler because Chrysler, as a smaller company, has far fewer retirees. The industry's big trade group, the Alliance of Automobile Manufacturers, has also been on the sidelines because it focuses mainly on trade and safety issues and represents foreign-owned car companies as well the U.S. automakers.

"There's no umbrella group," said Alan Reuther, the legislative director of the United Auto Workers union. "It's not like we all have the same talking points and it's all lockstep on things like relief for the industry."

Even the Michigan delegation has had its tensions. In mid-November, members of the delegation met at the Capitol to discuss auto industry issues with Michigan Gov. Jennifer M. Granholm (D). The meeting was stalled as Republicans and Democrats battled over Republican Rep. Candice S. Miller's attempt to open the meeting to reporters. Democrats said opening the meeting was an attempt by Republicans to embarrass Granholm, who is up for re-election next year. Once the doors were closed and members cooled off, however, the participants began to work together.

But what they discussed, participants insisted, was not a bailout.

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