Lawmakers sent the CEOs of Detroit's big three automakers home last week with some homework to do: return to Washington December 2, carrying a plan detailing how each automaker would use government money to return to profitability. If the banking committees of the Senate and House are satisfied with the plans, the full Congress could return to D.C. to vote on a second auto bailout bill the following week.
So what's in the plans?
The AP reports, "A list of job cuts, shuttered factories, canceled bonuses and commitments to fuel-efficient cars won't be enough next week when U.S. automakers get another shot to persuade Congress to give them $25 billion in loans." Instead, executive of the Big Three are expected to show lawmakers plans for "executive pay cuts, union concessions, and perhaps even higher fuel economy requirements and a glimpse at top-secret product plans."
A "person briefed on GM's preparations" told the AP the plan "is likely to include new, more visible sacrifices from top executives, even working for $1 per year. Also on the table are concessions from the United Auto Workers, including elimination of the much-criticized jobs bank in which laid-off workers keep getting most of their pay."
Ford's CEO may be in for a cut as well. CNN Money notes, "Ford Motor Co. Executive Chairman William Ford Jr. said he is reviewing the pay of Chief Executive Alan Mulally." Mulally's current compensation package will pay him about $22 million this year. Asked last week if he would consider cutting his salary, Mulally told members of Congress, "I think I'm OK where I am." But William Ford told National Public Radio, "We are talking to Alan about it. We are sensitive to public opinion."
The Detroit News reports that teams at each automaker are "working furiously behind the scenes" to craft the plans, which "could include new sacrifices from hourly union workers and holders of the automakers' more than $100 billion in combined corporate debt."
The final plans will "will include a 12-page summary that will be made public and a more detailed, approximately 100-page document that will remain confidential because it could include secret details about future product plans, such as plug-in hybrids and other advanced projects," the News reports.
The United Auto Workers Union has already agreed to major restructuring of its retirement benefits plan beginning in 2010, but that may not be soon enough. The U.K.'s Guardian reports, "The union contract hailed as the deal to save Detroit automakers a year ago is in danger of coming undone in the face of the industry's push to secure the federal bailout it now sees as its best bet to survive." Automakers are expected to ask the union to renegotiate portions of the plan, perhaps even rewriting provisions for retiree benefits, as part of any restructuring plan.
The plans won't be all about pay cuts and union concessions. Business Week explains, "According to some company executives who spoke on condition of anonymity because of sensitive negotiations over the bailout loans, most of the focus of the reports will be specifics on how much money each company is seeking in loans, how it will be spent, how long it will last each company based on reasonable economic forecasts until the economy improves and how it will be paid back." The pitches will also "attempt to better explain what each company has been doing in the areas of fuel economy, quality and technical innovation."
But without serious concessions from each company, the plans may not sway many opinions in Congress. The Detroit Free-Press notes that Senate Majority Leader Harry Reid (D-Nev.) and House Speaker Nancy Pelosi (D-Calif.) sent a letter to automakers recently demanding that the companies "explain their financial position, how they plan to spend the money and the assumptions behind their assurances that any loan will be paid back." The letter added, "In return for their additional burden, taxpayers also deserve to see top automobile executives making significant sacrifices and major changes to their way of doing business."
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