American Workers Can't Afford A Failed Auto Industry

Yesterday, Congressional Democrats unveiled legislation to stabilize the national economy and save hundreds of thousands of jobs by offering a lifeline to the domestic auto industry. Democrats share the American people's frustration with the failed management of the "Big Three" auto companies, but we also share their belief that major steps must be taken to prevent our nation from falling into a deeper recession. With the unemployment rate already the highest in fifteen years, monthly-job losses already the worst in a generation, and the home foreclosure rate already the highest on record, American families and the broader economy simply cannot afford the catastrophic consequences of a failed auto industry.

 

The Auto Industry Financing and Restructuring Act would provide immediate assistance to the U.S. auto industry, while requiring taxpayer protections, strong oversight, limits on executive compensation, and a plan for restructuring to ensure long-term viability.

 

Summary of the Auto Industry Financing and Restructuring Act

 

I.       Provide Immediate Assistance to the U.S. Auto Industry to Stabilize the Economy

 

At a time of great economic weakness, the failure of any of the "Big Three" auto companies - Ford, Chrysler, and General Motors - would have a devastating effect on the nation's economy. The Auto Industry Financing and Restructuring Act would provide bridge loans or lines of credit to auto manufacturers in order to help the companies continue to operate. The bill uses funds that have already been allocated - from Section 136 of the Energy Independence and Security Act - so it will not cost taxpayers additional money. The "Big Three" are eligible for assistance and will be held accountable to the plans they submitted to Congress.

II.    Protect Taxpayers

Taxpayers should not be expected to pay for the mistakes made by these companies. The legislation includes strict limits on executive compensation, including a ban on big bonuses for highly-compensated employees. Companies that receive funding will not be able to pay dividends to shareholders and will be required to sell their private planes. Warrants will ensure that taxpayers will benefit from any future growth these companies may experience. Moreover, the company's first financial obligation will be to pay back American taxpayers, regardless of the company's success.

III. Restructure Companies to Ensure Long-Term Viability

In order to create a domestic auto industry that is viable in the 21st century and competitive internationally, companies will be required to devise a long-term strategy to return to profitability and demonstrate a way to repay taxpayers. The President's designee will determine by January 1, 2009 how to assess each company's progress in turning its Congressional plans into long-term restructuring plans. By February 15, the designee will evaluate each company's progress. The President's designee will also try to facilitate an agreement on the company's long-term restructuring plan among interested parties (employees, retirees, unions, creditors, suppliers, auto dealers, and shareholders).

IV. Enforce Terms and Conditions

The President will designate a qualified individual to carry out the law, equipped with the ability to demand the government's money back should a company fail to meet its obligations under the law. The Government Accountability Office, a Special Inspector General, and the President's designee will conduct oversight of how the program is working, submit reports to Congress, and have access to information held by the company as well as its subsidiaries, affiliates, holding companies, and majority stakeholders. The President's designee may also review and prohibit any proposed asset sale, investment, contract, or commitment of over $25 million by the company or its entities.