Chrysler Suicide Watch 39: "Partnership for Technology Transformation"
The following Q&A was published on Chrysler's Firehouse media blog. TTAC republishes it here in its entirety, without editing, to provide insight into Chrysler's call on the public purse, and the ailing automaker's plans for the future. Such as they are… "The campaign season is in full swing, with the Democrats holding their convention in Denver this week, and the Republicans meeting in Minneapolis-St. Paul next week. John Bozzella, Vice President of External Affairs and Public Policy, will be at both conventions, hoping to win over Congressional support for funding the auto industry’s technology transformation to build a new fleet of fuel-efficient vehicles. We talked to Bozzella from Democratic Convention in Denver about the effort.
Q – Why are you in Denver this week and what are you hoping to accomplish?
Bozzella – We’re in Denver for a number of reasons, most importantly, to work on funding this important technology partnership between the auto industry and government. This partnership will drive forward advanced and alternative propulsion systems at a time when it’s particularly important to deliver improved fuel economy in our vehicles, while reducing greenhouse gases. We have an opportunity this week with the Democrats in Denver, and we’ll be going to Minneapolis next week to meet with Republicans and make our case. We hope to build some momentum to get this technology partnership funded before next year.
Q – Why would something like that be important to both the country and consumers?
Bozzella – The auto industry is an important contributor to the U.S. economy. Not just regionally, but nationally, through dealerships, parts suppliers, etcetera. Millions of jobs depend on a healthy U.S. auto industry.
At the end of the day, the ability to develop and produce this technology ourselves, and here in the U.S., will produce value across the economy. A home grown solution for batteries and other advanced technologies will impact far more than automotive manufacturers. It could also provide a much needed financial shot in the arm to the millions of others who are involved in the development and marketing of the technologies. That means jobs and a boost to our economy.
Also, let’s go back to last year. Chrysler supported a broad energy bill last year that included significant increases in fuel economy standards over the next 10 years. We were pleased to support that initiative. The bill also included a partnership to transform technology and to support the industry during its retooling to produce more fuel-efficient vehicles. We supported the whole bill which includes both of those provisions. If we go back to last year when that bill was signed, it was recognized by us and by the Administration that that was an important initiative and a critical partnership.
This partnership provides loan support to allow us to continue to make these multi-billion dollar investments, to continue to transform Chrysler and the industry at a time when the capital isn’t available to do so. That’s why it’s important to Chrysler because it gives us the access to capital to drive ENVI, to drive our hybrid strategy and to continue to make progress across the fleet on fuel economy. It’s important to the country because we can’t make progress on energy security and reducing greenhouse gases without a significant contribution from the auto industry.
I would add that there’s also a national security component to this. What would happen if the United States completely gives up its manufacturing sector? What would happen? We have as a nation, especially in the last century, called on the auto manufacturers to be the arsenal of democracy and to really provide huge military support during times of crises. That’s another element to this, to retain this manufacturing capacity, and we’re going to develop an advanced manufacturing capacity at the same time.
Q – Some call this a bailout. Is that right?
Bozzella – What we’re talking about is this is a partnership for technology transformation. By partnership, what the government is doing is providing loan support. This is not a blank check. This is not a Freddie Mac and Fannie Mae exercise. This is a partnership and providing loan support at a critical time to improve the country’s fuel economy. The notion that this would be considered anything other than a partnership seems beside the point to me. Last year, when Congress enacted this bill and the President signed it, nobody called it a bailout then. Back in December of 2007, I never once heard that word. Never once heard it. If it wasn’t bailout then, how is it a bailout now?
We have set a course to dramatically increase fuel economy in this country through increases in CAFE standards. What we have said in response to that is we are all in – we are going to deliver it, we are going to do it, and we are going to move forward. What Congress also said is let’s form a partnership to ensure that we in the United States have the capacity to have this technology leadership here. That’s what we talked about last year, and that is what we’re trying to finish this year. We’re finishing that business, and it is nothing more or nothing less than completing the lap on what was established last year.
Q – It sounds like you’re getting some political support this.
Bozzella – We’re seeing momentum to get this done. The support for this was bipartisan when it was enacted last year and remains bipartisan today. And also, we see support in both Houses. We are hopeful that we can complete the funding of the program this year.
Q – You’re also seeing some support in the press for this. One example is a blog by CNBC reporter Phil LeBeau. You can access LeBeau's blog "The Big 3 DO Need Federal Help" by clicking this link)
Bozzella – I think he framed it in a very appropriate way. What he’s essentially saying is, let’s not call this a bailout, let’s call this what it is, which is a significant and robust partnership to make sure we make progress as a nation. I can’t think of a more appropriate role for government – in contrast to bailing out the industry, provide support for the industry as it transforms itself. That’s the point we’re making. You can make a fairly strong contrast between a blank check-type bailout, which we’ve seen in recent months in some sectors of the economy, and a program that helps the industry transform itself."
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There are 2 ways to look at this loan guarantee. First: IF our congress had been raising fuel economy requirements faster, IF our congress had not been subsidizing the purchase of SUVs and PU, and IF our congress had been raising taxes on gasoline at the pump then our auto industry would have had to meet these challenges over the past 20 years and would not be in the desperate straits they are now in. Our engineers are just as capable as any in the world and they would have been able to meet the challenges that European and Asian engineers have had all along. Second: Because our congress failed the American people by not doing any of the above and failed our auto industry by not constantly providing challenges our auto executives took the easy way and now when outside forces have presented challenges the auto execs are in a panic. So should we have been paying higher gas taxes for the past 20 years and have better roads and a healthy auto industry or should we now risk billions on loan guarantees? Our congress is made up of very weak people. They have been easily frightened by the un-American nincompoops who call themselves conservatives (they have absolutely no idea what a real political/financial conservative is) who only know how to chant, “low taxes”. Yes, there are times to chant “low taxes” like when our congress people add earmarks to spending bills. But there have also been times when we should have been paying for something in the past to save money and panic now. Thinking ahead would require true financial conservative thinking. So because our congress failed us and our auto industry do we try to correct their mistakes now? We obviously can’t go back to correct their mistakes.
If Detroit wants a partnership and we have decided the country cannot afford to have Detroit fail then I say we give them a partnership. We should give them a standard partnership where what each side gets out is proportional to what each side puts in. GM is worth about $6B and needs about $24B, so this is what we should do: 1) GM stock is stopped from trading. 2) Five times the current amount of current outstanding stock is issued and given to the taxpayers (held by the government). 3) The stock is reverse split 6 to 1 so the number of shares stays reasonable. 4) The taxpayers give GM $24B. 5) Since the taxpayers now hold 80% of the stock, the board is replaced, and the new board hires an executive team that actually know how to run a business. 6) The new executives go through the management ranks with a hatchet and fire enough people to change the culture of failure. Also any employee who is heard, publicly or privately, to blame GMs problem on anything other than GM is summarily sacked. 7) The stock does not trade again for five years, at which point we can see whether the partnership has succeeded or failed.