Reviving The Auto Industry

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and joining us now our friend Tom fredman of the New York Times the author of a new book hot flat and crowded why we need a Green Revolution and how it can renew America and it is an excellent essay on where we are in the world today and you talk a lot about how the rest of the world is catching up with us and while that's good for them it's not always good for us and you can hear their hear their footsteps now Bob yeah yeah well let's talk a a little bit about what we just talked about here with with these two senators uh as he was leaving there you heard Senator DOD say that he thinks that Rick Wagner the chairman of GM has to go and we're going to have to have new management at these companies or at least think about it in some of the other companies as part of a condition if indeed there is a bailout uh what's your take on that you've written a lot about this well Bob um as a looks like I'm going to be a future shareholder of General Motors as a taxpayer and as a future shareholder of General Motors I sure don't want to have the management that drove this country in this company into a ditch stay stay on and hope that they're going to somehow miraculously drive it out so I would totally endorse New Management by the way if we could um and we're talking about bringing in a broom of course we can't do this we should also be talking about all those Michigan lawmakers who for 30 years protected these companies to death by insulating them from all the environmental pressures competitive pressures of uh of change um by preventing any mileage standards these are people remember who oppose seat belts rearview mirrors um just about any Innovation you could think of so um we need a real change of thinking here you need a change of thinking by management but you need a change of thinking Bob by the congressman and Senators who protected these guys year after year GM can only do two things today really well about they can Lobby Congress and they can advertise at the Super Bowl that's about it and until they get back to having the talent and management to make cars that people want to drive that is the core problem go on a a college campus today Bob how many young people do you see driving Pontiacs you know you don't see it that's the core problem they make cars people want to run where where where did they go wrong because you've written so much about this about the connectedness of the world economy there are people in the world who are making some pretty good cars uh why can't we make a good car or G you know the Detroit would argue we do make good cars but whatever the whatever the case they're having problems selling them what happened the core problem Bob is that they created business model because of the concessions they made to the unions and whatnot and and many other problems where they could really only make money making big cars making SUVs Hummers and trucks and so that was the only way they could make money so then what they did was they tried to create a universe basically where gasoline would be cheap and you could only or would only have to sell and make those big cars so you remember a couple years ago as gasoline prices Rose what was their response was it to move immediately to electric cars or more efficient cars no they came out with a program for $1.99 a gallon gas for a year if you bought a Hummer or a Yukon or a Suburban it was like a crack dealer saying Bob I'm going to guarantee you free crack or reduced crack for a year it wasn't I'm going to get you off your addiction and so that was they created a universe and then they tried to protect it and then the world basically impinged on them with higher energy prices and many other higher costs look do you remember when Hillary Clinton was pushing her National Healthcare program do you did you the auto companies out there saying we need a national healthc CARE program after all we have these huge burdens of health care costs no they were fat dumb and happy then now they tell us oh it's terrible we've got these health care costs wo me but were they out there campaigning for a national healthc care plan that they would have been the biggest beneficiaries of no they were brain dead and it's it's a travesty that the American people are in this terrible Choice today which the two senators outlined which is either we bail out people who really don't deserve to be bailed out by the way one of these car combies let's remember is a private Equity Firm syus Capital we're going to be bailing out a private Equity Firm that's Chrysler the guys who own Chrysler who bought Chrysler basically they got the car company for free they're really buying the financing arm and and they wanted the GM financing arm you know with it that was what they bought basically and they thought they just strip off the car company then oil prices went up and they got stuck holding the car company we're bailing those guys out okay let's the cus cus Capital people throw in some more money now you know why should we as taxpayers be bailing out a private Equity Firm so you you favor letting the car companies go down no I don't what I favor is if we're going to save them if we are going to save them then I want new management and I want to see a real plan for their survival I understand what Senator Dodd was saying it's terrible that the jobs that could be lost and we learned from Leman Brothers going broke what the unintended consequences of this can be but show me a plan because Bob the world has changed around these car companies let's use the example of the music business and entertainment which you know so well somebody came along and and developed a new way to to produce music it was the MP3 player the the the PC kids at home could produce their own music and they created a Napster in all those programs then someone came along called Steve Jobs and the iPod they figured a new way to distribute music the music business got flattened same in the in the news business people found a new way to generate news at home with blogging and a new way to distribute it Bob the same thing's happening in the car World in India today Tata is making a $2500 car there's companies coming up now with whole new models for electric cars new ways to produce new ways to energize the and distribute the the the what you the fuel for these cars there's a revolution happening in this business and if we give money to these people and it is not with a plan to take advantage of this revolution it would be Bob as if today we said let's give money to make RC a Victor record players in the world of iPods okay who's going to give the newspaper business a buyout in the age of the Blogger okay all right well that's what we're doing that's what we're talking about let's talk a little bit about uh the recent terrorism that we saw uh surface in India it reminded us that all our problems are not here in the United States what do you make of this and what what is the new Administration faced with here terrible problem that we Face here because Pakistan is a failing State and it's in a failing state for a long time um and at the same time you still have Al-Qaeda and all its various offshoots whatever brand names they go under out there but Bob if there's one thing we've learned from Iraq um uh in my view it's the simple message it takes a village okay what do I mean by that the the situation turned in our favor in Iraq not just because we sent more troops that that really that was necessary but it was not sufficient the sufficient ingredient was that Sunni Muslims in Iraq said you guys are radical you are dangerous you are dangerous to our health and we are going to take you on that's why the surge worked in the Sunni Community the same in the Shiite Community until that happens in Pakistan until you get millions of people in the streets in Pakistan who are ready to demonstrate against Danish cartoons that insult the prophet Muhammad until you get those same millions of people ready to demonstrate against people who murder real people not cartoon characters you're not going to get a change what can we do to change that well I think that what we can do obviously we've got to help the new Pakistani government as much as we can it's not perfect it's weak but there are decent people trying to tilt Pakistan in a better Direction they are definitely a start but we also have to challenge them we have to get in your face why are you out in the streets protesting for people about Danish cartoons and not people who are murdered in real life on the streets of India or your own towns all right Tom prman always great to have you thanks

Small Businesses Suffering

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as we said earlier more than a half million americans lost their jobs in november that's the biggest monthly cut in decades nearly 80 thousand worked in small businesses michelle miller met one of them who was laid off for the first time in his life no job was too big or small i did everything tony diano's mother wanted him to be a priest but in 1935 about the time he was confirmed hard times hit their italian immigrant family his father who had been working for the wpa passed away that left my mother as a widow with four children so deanno joined the workforce as a grocery boy what could i make i made 50 cents a week or a dollar a week 73 years later he can barely remember all the jobs that came after i carried at a golf course i was a bus boy i was an elementary school teacher for like 17 years deanno had a retirement plan and social security but to keep up with the rising cost of living he worked in this paint store for another 22 years until last month this is the first time i was ever fired i was never fired from any other job unfortunately tony was one that had to go for 60 years stephen marquetta's business has been a mainstay in milburn new jersey this is the worst that it's ever been i'd say the last two years 0.708 are the slowest years i don't blame the guy for furloughing me you know because the business was not as good as it had been deano can now bear witness to the fallout from two economic catastrophes the two economic situations are the bookends of my life book ends but not exactly alike i mean there are people out there still buying things whereas in the great depression we had nothing left over to buy something else these days in order to have something left over diana will be looking for a job michelle miller cbs news milburn new jersey you

Will An Auto Bailout Work?

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with us in the studio this morning is the chairman of the Banking Committee Senator Dodd with us from Mobile Alabama Senator Jeff sessions U there now seems gentlemen to be some sort of a deal Brewing between the Democratic leaders in the Congress Nancy Pelosi to be specific and the White House to take some of this money that was going already and has already been appropriated by the Congress to go to the to the automakers uh to start help them design more fuel effic cars to take part of that money about $15 billion and just give it to them uh so they can as sort of a bridge loan to help them basically pay the bills here and so uh I want to ask both of you uh number one do you think this is a good idea and number two do you think the votes are there now in the Congress to do something like this let me start with you sen session since you're down in Mobile this morning well I think uh it's a lot better than they were talking about earlier when the automobile makers wanted 34 billion dollar now we're talking about 15 and it's coming out of the uh money that's already been appropriated so I think the chances of Passage are better but I do believe that we haven't had the kind of Integrity in this request that's necessary the specificity that's necessary and I truly believe these companies would be better off if they sought reorganization under chapter 11 of the bankruptcy code like so many corporations have done uh these would be proceedings under oath they could relieve themselves of these Legacy costs and other unnecessary expenses come out leaner and more vibrant and be successful this is the best way to save jobs all right sander do well I I I I certainly know I don't like being where we are at all obviously the danger here is you could end up losing the industry in the next few weeks it's that precarious Bob that's not an exaggeration no one can say that with absolute certainty but the possibility of that is certainly strong and so I think many of us I think Democrats and Republicans don't want that to OCC Ur So I think you described it well this would be a bridge not a bailout uh to get us to the point where we can do exactly what Jeff has been talking about now the choice is whether or not you want to go for what they call a prepackaged uh chapter 11 bankruptcy which has some real problems associated with it or to create is something similar to that to empower a board or individuals to come in and do the kind of restructuring before the automobile industry would get any additional help at all and we might try to do that I know some say why don't we do that right now well the problem is we got 48 or 72 hours and and all of us are not experts in this area it's a very complicated area there are Legacy costs as Jeff has pointed out there other problems we need the time to do that it seems to me and certainly that way ought to be the way we proceed bankruptcy the problem with it one you've got pensions that could cost hundreds of billions of dollars that fall out of the back of the American taxpayer secondly the claim is made and I think there's some Merit to this that that we can do all these things but if consumers can't afford to buy cars the industry is going to fail uh and the likelihood that someone would buy a car from a bankrupt company I think is a legitimate Point well let let me ask you and and just a quick answer to this then we'll go on to something else do you think at this point the votes are there to pass this sort of limited or smaller bailout I think they will be even people who don't like this idea none of us want to wake up on January 1st and discover we don't have an industry to save Jeff's got some 50,000 people in his state that work in the automobile industry I've got about 15,000 2 million people one out of every 10 jobs in this country is either directly or indirectly related to the automobile industry including the foreign dealers here of cars they're going to be affected by this suppliers dealers obviously so none of us like this at all and there's a lot of reason to be furious at how the industry has handled itself but there's a lot more at stake than just Detroit if this were just about some companies in Detroit I'd let them fail in a New York minute well Senator uh a sessions like it or not do you think at this point uh realistically speaking that the Congress will go along with something like this I think Congress is tired of being stampeded they're tired of being threatened that we've got to pass something in any uh just a few days of voting or consideration we haven't even seen a bill yet so I think there's still a lot of skepticism out there and I have my doubts that it would pass until we have an opportunity to really see what this is about one of the things it's a lot closer than it was with uh them Waltzing in and going from 25 to 34 billion pretending to be humble one of the things the administration is talking about uh uh Senator sessions is setting up some what some people are calling a carar somebody an official in the Commerce Department perhaps who would have broad Authority uh to force these companies to reorganize uh do you think that is a good idea I'm not comfortable with that it's another Paulson Zar type person he hasn't been able to perform that well uh I am uneasy about the federal government telling these companies what they've got to do to be successful they are the experts at it not the federal government so I'm I'm troubled about that I think the bankruptcy procedure in which everybody is heard where people are under oath experts testify certified financial statements are brought up Union people have lawyers that represent their interests uh that's the best way that's the way the system is set up uh bo U Delta went into bankruptcy in 2005 it came out in 2007 it bought Northwest earlier this year I mean it's performing well bankruptcy reorganization under chapter 11 will save jobs the companies will continue to operate it does not shut the company down Integrity in that process what what do you feel about this idea of a cars are well I I I'd like to see us go try that uh we may end up where Jeff F Jeff F suggested but I I think there's as I said a moment ago problems with that uh just pension costs alone could total hundreds of billions of dollars that would would fall on the back of the American taxpayer again the ability to sell automobiles again if you don't sell automobiles there's a credit issue here that we're not really talking about consumers cannot buy cars you have to have a rating almost a perfect credit rating to buy an automobile today I was at a dealerships met with dealers yesterday in Connecticut they're having people walk in who a year ago or six months ago would have qualified to buy an automobile that are being turned down today because the credit ratings scores have to be so high the dealers themselves are having difficulty getting access to credit this is a credit problem credit is Frozen Bob entirely so I'm working all weekend have been working all day yesterday will today talking with Republicans and Democrats colleagues to see if we can't get this kind of support at least to get us to the point where we end up either doing what Jeff has suggested or something that has been suggested with an autosar or that like in order be say before you get any additional support at all then you've got to restructure to to a profitable company an effective company of viable companies I I want to just ask you about this whole idea of the bailouts in general uh you know that we've had this $700 billion the Congress appropriated told secretary Paulson he could use half of it I guess he's done that now he's talking about he may come back and asked your permission to use the rest of it do you think that what he has done so far has worked and should the Congress be ready to give him more money and this is money not going to the card makers but going into to Banks and financial institutes well I think some of it has worked and I think in the absence of doing what we did this probably would be a thousand times worse uh I I I'm totally secure in that statement to you Bob but I also been terribly disappointed that the uh Administration under secretary Paulson have not addressed the underlying problem and that is the Foreclosure issue which Grows by the hour chairman bernacki the other day said it well you need to address the Foreclosure mitigation issues so I'd be very reluctant to put it mildly uh to write a check or to give permission to have access to this 350 without some very very strong assurances about a different direction and I'm not sure they can give that so I think it would be I think if they were vote tomorrow and they came up and said give us 350 we want that second trunch I think it would lose overwhelmingly what about you Senor sessions I agree uh the the idea that this Senate in a panic mode before the election would give one man $700 billion to allocate amongst his friends on Wall Street as he chooses with virtually no oversight whatsoever is just breathtaking to me and I think we're having some VI remorse on that I think the fact that he flip-flopped from buying toxic assets to actually buying stock in Banks whether or not they wanted the government to buy B B stock in their own Banks or not is a very troubling situation so I think there's going to be a lot of skepticism uh to the second 350 you need any help from Senator Obama do either of you think on this well again I think certainly there may be some request and again I don't want to shut the door entirely on this because I disagree with Jeff I think this was absolutely essential had we not done what we did in October 1 uh this problem Bob would be far more serious than it is today injecting capital is what they should have done initially in my view you get far more leverage of a dollar that way than buying toxic assets but it was different from what he suggested um Chris I agree we gave him the broad Authority we gave him much more authority to do that but the idea here we are talking about $5 billion to keep 2 million jobs working in this country uh over the next few days uh next few weeks we wrote a check uh the government did for $36 billion a city we put $150 billion in AIG uh which is again now some $456 billion none of us voted on that at all and whether or not that's the best kind of use of those dollars is certainly questionable and I come back forclosure foreclosure foreclosure for more than two years Bob everyone who's looked at this issue has said until you put a tourniquet on the hemorrhaging of the Foreclosure problem in this country the problem does not go away 9,000 people a day in America are losing their homes let me go back to just one question on the auto thing uh they're talking about these various kind of conditions as yet Senor sessions nobody has brought up the idea of maybe these auto companies ought to find some different people to run them uh should the people who are in charge now be allowed to stay if they're going to get this sort of a bailout well if they get this kind of bailout they're subject to governmental restrictions they just no doubt about it and including salaries and that kind of things I'm a little reluctant to tell private companies who they have to choose as their officers but any private company the board of directors needs to be I think quite unhappy with how things have gone over the years and they should certainly be considering new leadership leave them there or consider new leadership I think you got to consider new leadership if you're going to really restructure this and you've got to bring in a new team to do this in my view and that's uh these should that be part of the condition of any bailout I think it's going to have to be part of it and and there are different positions I think it's it's clear GM is in the worst shape Chrysler is I think basically gone probably to be merged Ford is fairly healthy so we don't want to Brand all of these companies exactly the same way but nonetheless if you're going to restructure and have a viable manufacturing sector in our country so what you're saying about GM is that Rick Wagner the chairman has to go I I think he has to move on all right well gentlemen I want to thank both of you very enlightening