December 5, 2008

CONGRESSMAN GREGORY MEEKS CALLS FOR TOUGH STANDARDS IN EXCHANGE FOR ANY FEDERAL LOANS TO THE BIG THREE AUTOMAKERS

(WASHINGTON, DC)–Congressman Gregory W. Meeks (NY-6) expresses his thoughts on the House Committee on Financial Services hearing held today entitled, “Review of Industry Plans to Stabilize the Financial Condition of the American Automobile Industry.”   The hearing focused on the business plans submitted by Chrysler, Ford Motor Company, and General Motors (GM) in response to a call from the Congress regarding the Big Three request for up to $34 billion in federal loans to help prevent the failure of the American auto industry.

“Our national economy is in the midst of a recession which is impacting every business sector in our country.  The prospect of a failure of one or more of the Big Three American automakers, Chrysler, Ford Motor Company, and General Motors (GM) and the subsequent impact of a collapse would have a catastrophic affect on both the national and world economy,” said Congressman Meeks. 

At Thursday’s hearing, GM's Rick Wagoner, Ford's Alan Mulally, Chrylser's Robert Nardelli and Ron Gettelfinger, president of the United Auto Workers union testified before the House Committee on Financial Services as to their business plans, including concrete steps to achieve long-term viability, planned use of any government funds, conditions that should attach to such funds, and commitment to achieve or exceed fuel efficiency requirements.

“At a time when U.S. companies lost 533,000 jobs in November, bankruptcy is simply not an option because it would be not only the death of the American auto industry but would pose a systemic risk that would affect every sector of our economy.  The potential loss of over 5 million American jobs is terrifyingly indescribable.  This Congress must act in a sweeping and comprehensive manner that provides the appropriate legislative remedy.  We should focus on legislation that would effectively create a bridge loan for the industry and impose much tougher conditions on any aid that may be provided,” said Congressman Meeks.

GM is asking the Congress for a $18 billion loan package which would have priority over other debt. It proposes a $12 billion term loan to fund working capital needs and finance restructuring costs along with a $6 billion revolving loan to be tapped to cover working capital if vehicle sales continue to drop below baseline assumptions.  Chrysler has asked for an immediate $7 billion loan to cover its anticipated cash shortfall. The firm says the loan could be structured as senior to other obligations.  Ford has about $19 billion in cash on hand and an $11 billion line of credit and says it does not need federal assistance at this point. As part of the loan package for GM and Chrysler, however, Ford is asking for access to a $9 billion line of credit that would have a 10 year term

“Clearly the industry must set hard, spot-on benchmarks and metrics to obtain any federal funds.  They must do so to ensure long term success and viability.  I support the idea Congress entrust the decision whether to award any loans to the industry to a federal government trustee who would first seek to negotiate major restructuring plans at each of the companies. I believe that such a process could produce the necessary type of reorganization typically only possible in bankruptcy court and this solution could prevent the companies, their suppliers and consumers to the catastrophic impact of a bankruptcy.  This Congress must leverage our resources to provide for accountability to the American taxpayer and to ensuring a viable American auto industry,” added Congressman Meeks.

Now serving in his sixth full-term, Meeks was elected to the House on February 3, 1998. Representing New York's Sixth Congressional District in the United States House of Representatives, Meeks' district covers all towns of Southeast Queens, Far Rockaway and Howard Beach. He is a member of the House Committee on Financial Services and the Committee on Foreign Affairs.  Meeks is a Member of the Congressional Black Caucus (CBC), New Democrats Caucus and the Democratic Leadership Council (DLC).  He serves as the Co-chair of the Malaysia Caucus, Services Caucus, Dialogue Caucus and the Middle East Economic Partnership Caucus. 

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