The White House plan to use $17 billion in TARP funds to provide short-term loans to automakers was greeting with cheers on Capitol Hill, and in the boardrooms of General Motors and Chrysler, the two companies who will split the cash. But the UAW isn't cheering, and neither should American workers, including in the South, because at the end of the Republican rainbow is plan to not just bust the United Auto Worker union, and paralyze it politically, but also, and more important to conservatives, a plan to break the middle class wage itself, for workers north ... and south. You see, the Bush plan calls on the union to accept wages comparable to those paid by foreign automakers, located down South. But what is it that those automakers really want? They want to pay workers what's called a "prevailing wage," and they want the UAW to be forced to do the same. Why? I'll explain in a moment. First, let's look at the specific terms of the White House rescue plan, which I'll add, needed to be passed, only I wish it hadn't been passed in this form. The details, courtesy of the White House website:
Terms And Conditions
The binding terms and conditions established by the Treasury will mirror those that were supported by a majority of both houses of Congress, including:
Firms must provide warrants for non-voting stock.
Firms must accept limits on executive compensation and eliminate perks such as corporate jets.
Debt owed to the government would be senior to other debts, to the extent permitted by law.
Firms must allow the government to examine their books and records.
Firms must report and the government has the power to block any large transactions (more than $100 million).
Firms must comply with applicable Federal fuel efficiency and emissions requirements.
Firms must not issue new dividends while they owe government debt.
The terms and conditions established by Treasury will include additional targets that were the subject of Congressional negotiations but did not come to a vote, including:
Reduce unsecured debt by two-thirds via a debt for equity exchange.
Make one-half of Voluntary Employee Beneficiary Association (VEBA) payments in the form of stock.
Eliminate the jobs bank.
Work rules that are competitive with transplant auto manufacturers by December 31, 2009.
Wages that are competitive with those of transplant auto manufacturers by December 31, 2009.
Sounds good, right? Limits on executive pay, scaling back on the corporate jets, and the federal government gets stock. Great. But look at the last two provisions again:
Work rules that are competitive with transplant auto manufacturers by December 31, 2009.
Wages that are competitive with those of transplant auto manufacturers by December 31, 2009. [Emphasis added]
What does that mean? Let's go to the Los Angeles Times, and an op-ed by Unite Here food service union president Bruce Raynor, which takes us back to last week's failed Senate vote on an auto bailout that looks suspiciously similar to what Bush announced today:
The foreign nonunion auto companies located in the South have a plan to reduce wages and benefits at their factories in the United States. And to do it, they need to destroy the United Auto Workers.
Last week, Senate Republicans from some Southern states went to work trying to do just that, on the foreign car companies' behalf. Senate Minority Leader Mitch McConnell (R-Ky.), Sen. Bob Corker ( R-Tenn.) and Sen. Richard C. Shelby (R-Ala.) -- representatives from states that subsidize companies such as Honda, Volkswagen, Toyota and Nissan -- first tried to force the UAW to take reductions in wages and benefits as a condition for supporting the auto industry bailout bill. When the UAW refused, those senators torpedoed the bill.
Again, these are American Senators, colluding with foreign auto companies, many of whom are so heavily subsidized by their home governments, they practically are part of those governments, to LOWER THE WAGES OF WORKERS IN THEIR OWN STATES, not just the workers in Detroit. The L.A. Times piece continues:
When one compares how the auto industry and the financial sector are being treated by Congress, the double standard is staggering. In the financial sector, employee compensation makes up a huge percentage of costs. According to the New York state comptroller, it accounted for more than 60% of 2007 revenues for the seven largest financial firms in New York.
At Goldman Sachs, for example, employee compensation made up 71% of total operating expenses in 2007. In the auto industry, by contrast, autoworker compensation makes up less than 10% of the cost of manufacturing a car. Hundreds of billions were given to the financial-services industry with barely a question about compensation; the auto bailout, however, was sunk on this issue alone.
UAW President Ron Gettelfinger realized that the existence of the union was under attack, which is why he refused to give in to the Senate Republicans' demands that the UAW make further concessions. I say "further" because the union has already conceded a lot. Its 2007 contract introduced a two-tier contract to pay new hires $15 an hour (instead of $28) with no defined pension plan and dramatic cuts to their health insurance. In addition, the UAW agreed that healthcare benefits for existing retirees would be transferred from the auto companies to an independent trust. With the transferring of the healthcare costs, the labor cost gap between the Big Three and the foreign transplants will be almost eliminated by the end of the current contracts.
These concessions go some distance toward leveling the playing field (retiree costs are still a factor for the Big Three). But what the foreign car companies want is to level -- which is to say, wipe out -- the union. They currently discourage their workforce from organizing by paying wages comparable to the Big Three's UAW contracts. In fact, Toyota's per-hour wages are actually above UAW wages.
However, an internal Toyota report, leaked to the Detroit Free Press last year, reveals that the company wants to slash $300 million out of its rising labor costs by 2011. The report indicated that Toyota no longer wants to "tie [itself] so closely to the U.S. auto industry." Instead, the company intends to benchmark the prevailing manufacturing wage in the state in which a plant is located. The Free Press reported that in Kentucky, where the company is headquartered, this wage is $12.64 an hour, according to federal labor statistics, less than half Toyota's $30-an-hour wage.
If the companies, with the support of their senators, can wipe out or greatly weaken the UAW, they will be free to implement their plan.
So you see, southerners, you've been had ... again. Your Senators want to crack your wages IN HALF, and make you take the pay cuts with a smile (you beat those dirty old unions, hooray! The South shall rise again...!)
But of course, a provision in the Bush plan makes that plan unlikely to succeed, at least not unless Hank Paulsen has a Jeb Bush style "devious plan" to crush the UAW by January 20th. The provision is married, paragraphically speaking, to an afterthought of the deal: making the other major stakeholders, besides labor, share the load:
These terms and conditions would be non-binding in the sense that negotiations can deviate from the quantitative targets above, providing that the firm reports the reasons for these deviations and makes the business case that it will achieve long-term viability in spite of the deviations. In addition, the firm will be required to conclude new agreements with its other major stakeholders, including dealers and suppliers, by March 31, 2009. [Emphasis added by the White House, not me]
The union can, and will, appeal the work rules and pay "targets" in an appeal to the Obama administration. And Barack Obama has done us the considerable favor of nominating a true friend of the labor movement, California Rep. Hilda Solis, to be his next labor secretary (witness the frothy-mouthed reaction of anti-unionites here), not to mention Bill Richardson, who will be heading the Commerce Department, and his in-coming financial team. Un-American mission (by the Dixie Axis of Corker, McConnell and Shelby, et.al.) not accomplished.
After one of the most disgraceful periods in American history, as Senate Republicans dithered around with the futures of 3 million American workers and countless more when you add the ripple effect of losing a key part of our manufacturing sector, the Bush administration steps in and puts Detroit on life support until the Obama administration gets in place. But I'm wondering what was the hold-up, since Bush's plan looks suspiciously familiar... in fact, what the administration put in place today was the Corker plan, only with taxpayer money being handed to GM and Chrysler by Ben Bernanke instead of by Harry Reid. To whit, this is the Bush plan:
Some $13.4 billion of the rescue money will be available this month and next — $9.4 billion of it for General Motors Corp. and $4 billion for Chrysler LLC, the two auto giants that have said they could be facing bankruptcy soon without government help. GM is slated to receive the remaining $4 billion in loans after more money is released from the financial rescue account. Ford Motor Co. says it doesn't need federal cash now but would be badly damaged if one or both of the other two went under.
Under terms of the loans, the government will have the option of becoming a stockholder in the companies, much as it has with major banks, in effect partially nationalizing the industry. Bush said the companies' workers should agree to wage and work rules that are competitive with foreign automakers by the end of next year.
And he called for elimination of a "jobs bank" program — negotiated by the United Auto Workers and the companies — under which laid-off workers can receive about 95 percent of their pay and benefits for years. Early this month, the UAW agreed to suspend the program.
• One, give existing bondholders 30 cents on the dollar to help reduce their overall debt load.
• Two, bring wages immediately in line with companies like Nissan and Volkswagen.
• Three, GM owes $23 billion to the United Auto Workers' VEBA (voluntary employees' beneficiary association) account. The union must agree to take half of that payment in GM stock.
• Four, the union must agree to do away with payments to workers who are still receiving almost full compensation up to four years after their jobs ended.
That last bit there? That's the job's bank. And the Southern Senators' scheme of forcing UAW wages to ... and this is still stunning to me ... match the wages offered by foreign companies, stands.
The union can appeal to the next administration under the terms of the agreement, which to my mind, is a naked attempt to emasculate the union and make it impossible for it to move into the southern states. And according to the UAW's president, they will.
The WSJ reports, but GM denies ... that the country's largest automaker will merge with one of its most troubled. Per ABC News:
The White House described the condition of the country's carmakers today as "fragile," as negotiators struggled to hammer out a possible financial bailout package before the auto giants collapse.
Pressure grew for a deal as Chrysler announced Wednesday it will close all 30 of its manufacturing facilities in North America until Jan. 19. Chrysler's move to conserve cash will suspend production of its cars and trucks for the greater part of the month, affecting about 46,000 members of the United Auto Workers.
The Chrysler shutdown comes on the heels of a warning to dealers that the automaker may halt financing for stocking showrooms. Many dealers say that buyers are out there but that loans are unavailable, resulting in a 20 percent to 25 percent loss in sales. Meanwhile, Chrysler is burning through more than $1 billion a month.
And General Motors, which also faces the possibility of collapse without a federal rescue, said Wednesday it will delay construction of a factory in Flint, Mich., set to produce the plug-in electric Chevy Volt, in order to conserve cash.
The Wall Street Journal reported today that Cerberus Capital Management LP, which owns Chrysler, had resumed merger talks with General Motors in an effort to shed some of the expense and to convince Washington it is ready for drastic changes.
But GM promptly issued a statement denying that merger talks had restarted.
GM and Chrysler had been in talks earlier this year to combine in order to survive the recession and slowing U.S. sales, but financing emerged as one of the biggest obstacles
But isn't part of the problem that GM is already too big, and too stuffed with too many brands? And isnt' that one of the reasons the bohemoth has failed to innovate? Just asking...
The WaPo columnist offers the most comprehensive, succinct explanation of why Republicans hate unions (and by inference, the middle class) this side of Thom Hartmann. To whit:
... by the early 1950s, the UAW had secured a number of contractual innovations -- annual cost-of-living adjustments, for instance -- that set a pattern for the rest of American industry and created the broadly shared prosperity enjoyed by the nation in the 30 years after World War II.
The architects did not stop there. During the [Walter] Reuther years, the UAW also used its resources to incubate every up-and-coming liberal movement in America.It was the UAW that funded the great 1963 March on Washington and provided the first serious financial backing for César Chávez's fledgling farm workers union. The union took a lively interest in the birth of a student movement in the early '60s, providing its conference center in Port Huron, Mich., to a group called Students for a Democratic Society when the group wanted to draft and debate its manifesto. Later that decade, the union provided resources to help the National Organization for Women get off the ground and helped fund the first Earth Day. And for decades after Reuther's death in a 1970 plane crash, the UAW was among the foremost advocates of national health care -- a policy that, had it been enacted, would have saved the Big Three tens of billions of dollars in health insurance expenses, but which the Big Three themselves were until recently too ideologically hidebound to support.
Narrow? Parochial? The UAW not only built the American middle class but helped engender every movement at the center of American liberalism today -- which is one reason that conservatives have always held the union in particular disdain.
Over the past several weeks, it has become clear that the Republican right hates the UAW so much that it would prefer to plunge the nation into a depression rather than craft a bridge loan that doesn't single out the auto industry's unionized workers for punishment. (As manufacturing consultant Michael Wessel pointed out, no Republican demanded that Big Three executives have their pay permanently reduced to the relatively spartan levels of Japanese auto executives' pay.) Today, setting the terms of that loan has become the final task of the Bush presidency, which puts the auto workers in the unenviable position of depending, if not on the kindness of strangers, then on the impartiality of the most partisan president of modern times.
Meyerson explains that while Republicans cry that labor costs are killing Detroit, labor contributes just 10 percent of the cost of a new car, while on Wall Street, salaries and bonuses represent 60 percent of expenses, though those "legacy costs" weren't an issue in the $700 billion Paulsen bonus-fest. And so:
In a narrow sense, what the Republicans are proposing would gut the benefits of roughly a million retirees. In a broad sense, they want to destroy the institution that did more than any other to raise American living standards, and they want to do it by using the power of government to lower American living standards -- in the middle of the most severe recession since the 1930s. The auto workers deserve better, and so does the nation they did so much to build.
Indeed. The Bush years have represented the largest transfer of wealth from the middle class to the upper class in American history. The heart and soul of this runaway theft ring, which actually dates back to Reagan, but which was partially interrupted by Bill Clinton's unexpected presidency (which the GOP tried its best to overturn, using sex as a weapon) is the breaking of unions, from PATCO under Reagan to the UAW today. Unions impact on the supply and cost of labor reaches beyond their own members, and the upward pressure they place on wages is felt throughout the economy, even at Wal-Mart. Hence, the GOP, the party of low wages, sees killing the UAW as an imperative to letting their clients, the very rich, steal more money. It's just that simple.
A majority of Americans continue to oppose help for the U.S. auto industry. But inside the new Washington Post/ABC News poll, is the number that a Democratic majority Congress, if it has any brains (or courage, which is doubtful on any given day) whatsoever, will pay attention to:
Democrats are among the most wary of the economic impact of failure, with 42 percent saying it would hurt the economy. They are more apt to advocate federal aid — 52 percent support it, up from 42 percent support for previous versions of the rescue bill. But they, too, are deeply critical of company managers — 72 percent fault Detroit's strategies, not the overall economy.
And the poll shows strong regional differences in support for bridge loans, with southerners and those out West opposing helping Detroit. Big surprise. Bottom line: Democrats, for once, should listen to THEIR base. Most Americans have no clue what the economic impact of the simultaneous unemployment of 3 million people, and the bankrupting of multiple industry suppliers would mean. That's what we elected you guys for.
Michigan Gov. Jennifer Granholm (D) said it was "un-American" for senators to have voted against approving a bailout of troubled automakers last night, saying their vote may cause a recession to become a depression.
"It is unacceptable for this un-American, frankly, behavior of these U.S. senators to cause this country to go from a recession into a depression," Granholm said during a radio interview Friday morning.
Negotiations over an agreement to assist Michigan's Big Three stalled last night in a 52-35 vote on a procedural motion to bring up the package for a vote. Republicans largely opposed the bill after it failed to win concessions from the United Automotive Workers union on wages and benefits.
“It is such an unbelievable stab at workers across the country,” Granholm added. “You give this big bailout to these financial institutions–don’t ask a single question, they can do what they want–and then you lay the blame for the auto industry, which is a victim of this financial meltdown, on the backs of the people who are working on the line.”
Bottom line: there is a party of working men, and a party of capitalists, and the latter's mantra is "low prices, low wages, maximum profits."
UAW President Ron Gettelfinger said today that U.S. automobile companies are being put at a disadvantage by government in competing against Volkswagen’s new auto assembly plant in Chattanooga.
The union leader questioned why government leaders in Tennessee are willing to provide assistance to the German-based Volkswagen while the state’s U.S. senators declined to back a federal loan to help the Big Three U.S. car makers.
Mr. Gettelfinger said that trying to equalize UAW pay with what foreign car makers pay in the United States, as urged by U.S. Sen. Bob Corker, R-Tenn., is like comparing apples to oranges. In its home country, Germany provides government-paid health care for Volkswagen workers, and VW is receiving $577.4 million in tax breaks and direct assistance from Tennessee governments to build an automobile plant in Chattanooga.
“They use taxpayer dollars to subsidize our competition,” Mr. Gettelfinger said during a news conference. “It doesn’t help our industry.”
The GOP has, officially I think, lost the Great Lakes region for at least a generation. Ohio included. Good luck being the party of the former Confederacy, boys.
ThinkProgress has the list of Senators who said "oh yeah!" to bailing out Wall Street bankers to the tune of $700 billion, but who couldn't find it in their little coal colored hearts to help the American auto industry. Here they are:
Sen. Max Baucus (D-MT) Sen. Robert Bennett (R-UT) Sen. Richard Burr (R-NC) Sen. Saxby Chambliss (R-GA) Sen. Tom Coburn (R-OK) Sen. Norm Coleman (R-MN) Sen. Bob Corker (R-TN) Sen. John Ensign (R-NV) Sen. Chuck Grassley (R-IA) Sen. Judd Gregg (R-NH) Sen. Orrin Hatch (R-UT) Sen. Kay Hutchison (R-TX) Sen. John Isakson (R-GA) Sen. Jon Kyl (R-AZ) Sen. Blanche Lincoln (D-AR) Sen. Mel Martinez (R-FL) Sen. John McCain (R-AZ) Sen. Mitch McConnell (R-KY) Sen. Lisa Murkowski (R-AK) Sen. John Thune (R-SD)
There were another 10 Senators who voted for the TARP but were absent for last night's vote on the automakers:
Sen. Lamar Alexander (R-TN) Sen. Joe Biden (D-DE) Sen. John Cornyn (R-TX) Sen. Larry Craig (R-ID) Sen. Lindsey Graham (R-SC) Sen. Chuck Hagel (R-NE) Sen. John Kerry (D-MA) Sen. Gordon Smith (R-OR) Sen.Ted Stevens (R-AK) Sen. John Sununu (R-NH)
Some had better excuses than others for not being around:
iden was tending to transition duties, while Kerry was in Poznan, Poland, participating in U.N. climate change talks. Alexander was home recovering from surgery. Why did these other Senators feel auto workers weren’t as deserving as Wall Street? We’d like to know.
The White House appears ready to step in to prevent General Motors and Chrysler from collapsing on George W. Bush's watch. From the WaPo:
The Bush administration said today it is willing to consider using funds from other sources to provide emergency aid to the nation's Big Three car companies following the Senate's rejection Thursday night of a congressional bailout plan.
The statement from White House spokeswoman Dana Perino marks a shift in tone for the administration, which has so far rejected the idea of using money from the $700 billion Troubled Asset Relief Program or other sources under its control to help the auto industry survive. After the collapse of negotiations in Congress, however, the White House said all options are on the table to help keep the automakers in business. GM and Chrysler have said they are in critical need of help, while Ford's position is less dire.
"Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms," the White House statement said. "However, given the current weakened state of the U.S. economy, we will consider other options if necessary -- including use of the TARP program -- to prevent a collapse of
"A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time," the statement said.
An official at the Treasury Department, which administers the TARP, said separately that the agency was "ready to prevent an imminent failure" of the auto companies, the Reuters wire service reported.
The reason for the urgency: suppliers to GM can't extend credit to the company so it can keep producing cars, so GM will have to ... stop producing cars. And the reason for that? The banks who received hundreds of billions of your tax dollars, refuses to lend the money out, including to the suppliers.
DETROIT -- Cash-starved General Motors Corp. and Chrysler LLC within weeks will be hit by $9 billion in bills for already-delivered auto parts, a tab they likely can't afford to pay without emergency government assistance.
Parts suppliers, hammered in recent months by a severe downturn in U.S. auto sales, face shortfalls of their own if the auto makers fail to pay.
The impending payments to suppliers, which in GM's case account for nearly half the cash the company had available at the end of the third quarter, present the most immediate threat to the auto makers as they plead for a lifeline from the Bush administration following the defeat of a $14 billion auto loan package late Thursday by the Senate.
Concerns are rising that parts manufacturers now could take steps to tighten payment terms, which would accelerate the cash burn that threatens the viability of the auto makers.
"We need to satisfy suppliers that there is going to be a tomorrow," United Auto Workers President Ron Gettelfinger said Friday at a news conference.
"If suppliers believe they can't operate, what are they going to do? They aren't going to deliver the goods. If they don't deliver the goods, the plants go down," the UAW chief added.
The reality is that many of the suppliers are just as challenged as GM and Chrysler, which have said they need more than $10 billion in government assistance by year's end to avoid collapse. Just as the auto makers rely on their suppliers and the trade credit they provide, parts manufacturers have suppliers of their own.
Meanwhile, in one of those patented "strange bedfellows situations," the UAW is now putting its faith in President Bush, having been failed by a weak Senate majority leader, and a wicked bunch of Dixiecans whose goal, after all, was to crush the UAW.
UPDATE: Dubya has apparently been warned by George Voinovich that if he doesn't act, he'll be known as "George Herbert Hoover Bush," and apparently, the Dark Lord sent the same message to his party ...
Asian markets are down sharply this morning after southern Republicans tank the auto bailout. From CNN Money, proof that Shelby, Corker and McConnell's scheme to tank Detroit in order to
help Japan and Germany didn't quite work that way:
A week of solid gains ended on a sour note for Asian markets Friday as stocks across sectors got hammered after a $14 billion government bailout of the Big Three automakers collapsed in the U.S. Senate.
Regional car makers such as Toyota Motor Corp., Honda Motor Co. and Hyundai Motor Co., who depend heavily on the U.S. market, plunged in afternoon trading.
Major global currencies also plunged against the yen as risk-averse investors reversed their short sales of the Japanese currency after Senate Majority leader Harry Reid said the Democratic and Republican Senators failed to reach a compromise on the bailout package, which cleared the House of Representatives Wednesday night.
Left to right: Senators Bob Corker (R-TN), Mitch McConnell (R-KY) and Richard Shelby (R-Bama.) Are they acting as agents of foreign governments?
The pared down, $14 billion Big Three bailout loan deal, passed the House today, but appears dead in the Senate after talks broke down late tonight, mostly because of the objections of a trio of southern Senators, who had vowed to kill the bill there with a good old fashioned, Old Dixie filibuster, unless the auto workers' union agrees to "bring their members' wages and benefits in line with those of Japanese automakers.' And while you digest the fact of American Senators calling for U.S. workers to bow and scrape for whatever foreign companies have on offer, ask yourself these questions:
Why would three southern Senators want to kill the American automotive industry? Would United States Senators really attempt to crush a crucial part of our homegrown industrial base on behalf of foreign automakers? And if so, shouldn't Richard Shelby of Alabama, Bob Corker of Tennessee and Mitch McConnell of Kentucky have to register with the attorney general as agents of foreign governments? After all, Japan and Germany heavily subsidize their auto industries, and both countries provide universal healthcare, which is one big reason Toyota, Honda, Volkswagon, et.al have much lower legacy costs than the Big Three. And when these companies earn profits, what they don't pay in federal and payroll taxes, goes right back to their home governments, hence our three Senators are in essence, lobbying on behalf of Tokyo and Berlin.
To backtrack, these three gentlemen, and I use the term very loosely, all-but promised to kill a deal to bail out the Big Three in Washington, even though one of them, McConnell, was key to passing the much bigger bank bailout. The problem? Again, not bailouts, per se. They're for them when it comes to the banks (except Corker, who voted against the Wall Street handout.) The trouble here, is that all three of these guys have major foreign automakers implanted in their states, those automakers having been drawn to places like Alabama, Kentucky and Tennessee by billions of dollars in ... you guessed it ... (state) government handouts. Crippling Detroit, even at the cost of millions of American jobs, could only help the Senators' foreign clients out, in no small part by breaking the United Auto Workers union, and preventing it from attempting to unionize southern auto workers, thereby reserving the preferred status conferred on the Toyotas, Hondas and Volkswagons of the world. From the Detroit Free Press:
Alabama is home to plants for Mercedes-Benz, Honda, Hyundai and Toyota. Tennessee is getting a new Volkswagen plant and is home to Nissan’s North American headquarters and other manufacturing facilities.
Georgetown, Ky., in McConnell’s home state, is the site of Toyota’s biggest plant outside Japan.
Sen. George Voinovich, R-Ohio, a supporter of the auto industry rescue plan, said he’s still waiting for specifics on what the legislation’s critics are demanding.
“I think it’s antiunion. I think that’s the motivation behind it,” said Mike Kennedy, 44, of Warren, a member of UAW Local 961 who works at Chrysler’s Detroit Axle plant on Lynch Road. “They want us to file for bankruptcy so they can walk away from their obligations.”
Kennedy said he’s hearing a lot of anger toward Southern senators among rank-and-file members, likening it to a civil war ready to break out again, North against South.
And then there's the small matter of politics: the UAW is a big booster of Democratic Senate candidates, and who needs that, right boys?
What this crisis has created is the unbelievable spectacle of supposedly loyal Americans, starting with Mssrs. Shelby and Corker, demanding that American auto workers accept whatever wages foreign automakers pay their employees, essentially reducing these United States Senators to bag men for the former Axis powers. In fact, freshman Senator Corker's plan read like a World War II appeasement letter:
Corker's four-point plan requires existing bondholders to accept 30 cents on the dollar to help reduce automakers' debt, and force the car companies and United Auto Workers to bring wages immediately in line with foreign automakers. It also would drop supplemental unemployment payments to workers. He also wants the UAW to agree to take half of the payments they are owed from Detroit's automakers to fund a trust the union would manage beginning in 2010 to pay for retiree health care. In exchange, General Motors Corp. and Chrysler LLC would get up to $14 billion in emergency loans immediately to help them fund their operations. If they didn't get concessions by March 15, they would have to file for bankruptcy.
He grew up in Chattanooga, a city that was repeatedly rejected by U.S. auto makers as a site for new plants. But Volkswagen turned around Chattanooga’s fortunes in July by agreeing to build a $1 billion assembly plant near the city–the German auto maker’s first assembly plant in the U.S. Volkswagen plans to build hundreds of thousands of vehicles there in the next few years, providing 2,000 manufacturing jobs as well as countless more jobs in supply and logistics. So, where the Big Three had let the city down, Volkswagen capped the city’s long-desired industrial revival. As Corker told the Associated Press at the time, the city “will never be the same again.” Volkswagen is building the plant to compete with Toyota Motor, which puts Chattanooga inside the most competitive dynamics in the global auto industry.
McConnell, the Senate minority leader, has made no secret of his eagerness to see the American auto industry say "sayonara" so that the Japanese can keep greasing up non-union Kentucky:
“We also have other auto manufacturers who are doing quite well,” McConnell said, naming Toyota’s Georgetown, Ky., operation. “It happens not to be American companies and that is sad. But it’s not like we don’t have success in the auto industry. We do.”
And Shelby, the ranking Republican on the Senate banking committee, has been equally skeptical of the absolute need to have a strictly "American" automobile industry:
WASHINGTON (Nov. 19) - Sen. Richard Shelby, who represents a state with 134,000 people who help build cars for Asian and European companies, was unpersuaded Tuesday when American auto executives asked Congress for emergency financial aid to stay afloat.
"Are we here in the Senate being asked to facilitate a stronger, more competitive auto manufacturing sector, or to perpetuate a market failure?" Shelby asked at the opening of a standing-room-only hearing on Capitol Hill.
After the hearing, he concluded that it was the latter.
And about those state subsidies, you know, the government money being thrown at an auto industry, only the governments are former Confederate states and the automakers are NOT American? Well ... it's a LOT of money:
Shelby's position is not merely that of a fiscal conservative. His home state has provided millions of dollars in taxpayer subsidies to lure Honda, Hyundai, and Mercedes-Benz to build huge plants there. Indeed, some critics believe that without the incentives from Alabama - and similar tax breaks given by a number of other states to a dozen foreign automakers - the Detroit companies would not need a federal bailout.
The foreign-based automakers have received relatively little attention during the debate over the auto bailout bill because they have not asked for money from Con gress. Yet their role is immense: In 2007, for the first time, foreign firms produced a majority of cars sold in the United States. While Detroit's auto industry is shutting plants and slashing union jobs, the foreign-based auto companies have been booming, particularly in the South, with new nonunion plants slated to open in Tennessee and Georgia.
House Financial Services Committee chairman Barney Frank of Massachusetts, who is playing a key role in hammering out a loan deal, said in an interview that some opponents are "completely hypocritical" because they back local tax incentives to lure foreign companies that now pose some of Detroit's stiffest competition. Frank also denounced those members of Congress who oppose the assistance for the Detroit automakers as a matter of fiscal prudence at the same time they fight for agricultural subsidies for their states.
So how much money are we talking?
It is difficult to ascertain the exact amount of tax subsidies provided to the foreign automakers because they are provided by so many localities and in different ways, including property tax breaks and corporate tax abatements. One study found that the total subsidies to foreign automakers exceeded $2 billion.
Alabama paid more up front per job in tax subsidies to the foreign automakers than Detroit is asking per job with the loans, said Cole of the automotive center.
I've heard figures of upwards of $250,000 per job gained. Meanwhile, the GOP is about to preside over the flushing of 3 million jobs and the pensions of 850,000 retirees ... many in swing states. For Shelby, Corker and McConnell, who live in ruby red states, that may not matter. But it will matter to their party, which will be blamed ... make no mistake about it ... if the Big Three, or even just General Motors, vanish under Bush's watch. Believe it.
I say all of this, by the way, as one who is no fan of the "built in obsolescence" crowd that's been running the U.S. auto industry for a generation (and the moron politicians who heaped SUV tax break largesse on them), and as somebody who specifically detests the Ford Motor Company (my three-year-old Expedition having literally exploded in my driveway a couple of years ago, and the company having sniveled out of responsibility for it, and sent me a nice letter about the ignition switch recall the NEXT DAY.) My mother had a Chevy Cavalier when I was growing up that was a piece of shit, too. In fact, all our cars when I was growing up were made by General Motors, and the only one that was worth a plug nickel was my gigantic 1974 Buick Apollo that my mom's best friend gave me for $300 my senior year in high school (in 1986. Hey, you can fit a lot of friends in a Buick Apollo...) I have, on occasion, vowed out loud to never buy another mother-bleeping American car. And yet, at my house, we have one foreign and one domestic -- an Acura and a Jeep Grand Cherokee Limited. I drive the Jeep. And I must admit, I love the bloody thing. But what's most important is that for all their faults, and I think all of the management should be fired, I believe that whatever Shelby, Corker and McConnell might think, America simply cannot remain an industrial power without a homegrown manufacturing industry, and right now, the auto industry is the biggest manufacuring sector left. If we let it go, even 10 million Honda jobs in Dixie at Wal-Mart wages won't buy us back our economic clout.
In the 1950s, we made all our own toys, clothes, shoes, bikes, furniture, motorcycles, cars, cameras, telephones, TVs, etc. You name it. We made it.
Are we better off now that these things are made by foreigners? Are we better off now that we have ceased to be self-sufficient? Are we better off now that the real wages of our workers and median income of our families no longer grow as they once did? Are we better off now that manufacturing, for the first time in U.S. history, employs fewer workers than government?
We no longer build commercial ships. We have but one airplane company, and it outsources. China produces our computers. And if GM goes Chapter 11, America will soon be out of the auto business.
Our politicians and pundits may not understand what is going on. Historians will have no problem explaining the decline and fall of the Americans.
Just a thought: why would Congressional Democrats consent to the creation of a "car czar" who serves at the pleasure of, and reports to, President Bush? Are they not setting Bush up perfectly to appoint an uber union-buster who will, from the moment he or she takes office until they leave in 40 odd days, be a lame duck on a pop up timer, with the game being, "break the UAW before you go?" Sayeth the WaPo:
Under the plan, unveiled by Democratic leaders, the Treasury Department would cut checks for the car companies as soon as next week. The proposal also calls for President Bush to name a "car czar" to manage a vast restructuring of the firms and restore them to profitability.
Democrats bent to the will of the president on several key demands, most notably in agreeing that the emergency funding would be drawn from an existing loan program aimed at promoting fuel-efficient technologies.
Still, the White House objected yesterday to several elements of the Democratic proposal, congressional aides said, including requirements that the car companies notify Washington of any transaction of more than $25 million and that they pull out of lawsuits against states seeking to enforce tougher tailpipe-emissions standards.
Under the proposal, the car companies would be required to submit detailed plans for restructuring by March 31, when they would be eligible for additional government assistance. The Bush administration was pressing to strengthen those provisions to make clear that only companies that were either financially viable or taking steps to achieve viability could receive more federal cash.
Wow. Giving in to Bush demands. That's a new one for Congressional Dems ... (yeesh)...
Aside from the distastefullness of Pelosi and Company's hapbit of ALWAYS giving in to a weakened president, it seems to me that the proposed $15 billion "mini-bailout" does three things:
1) Ties President-Elect Obama's hands, by making all deals binding through March, thus giving a Bush appointee, who if history is any guide, will be a union-busting Kleptocrat, authority that reaches into the next administration.
2) Jeopardizes the UAW, by creating conditions that can likely only be met by eviscerating the current, slimmed down union contract, and/or by laying off thousands more workers, to meet Wall Street's standards of "profitability."
3) Puts suppliers in jeopardy, but potentialy forcing the Big Three to break contracts with these, typically smaller, companies in order to meet the bailout requirements.
Instead of such a deal, can't Congress simply appropriate money for the automakers, within their constitutional authority, and dare the lame duck president to veto? The bottom line is that the auto companies are practically worthless, particularly GM and Chrysler, and as Michael Moore says, they could be bought outright for a fraction of the cost of bailing them out. The Congress holds the whip hand, but as usual, they are too timid to use it. Nancy Pelosi can talk about "haircuts" all she wants, but the fact remains that this is a big give to the outgoing president.
It's a shame when ordinary Americans, like the workers at Republic Windows and Doors, are ballsier than the people who supposedly represent us in Congress.
“The Federal Reserve would be extremely reluctant to extend credit where Congress has actively considered providing assistance, but after due consideration, has decided not to act,” Bernanke wrote Dodd. The letter was dated Dec. 5 and released Tuesday.
... lending directly to an auto company would represent a “marked departure” in the use of the Fed’s emergency program, which is aimed at promoting financial stability, a crucial underpinning for the broader U.S. economy, the Fed chief wrote.
“It would raise the question as to whether the Federal Reserve should be involved in industrial policy, which has traditionally been outside the range of our responsibilities,” Bernanke wrote. “Our view is that questions of industrial policy are best resolved by Congress.”
Word broke on the Rachel Maddow Show tonight that House leaders appear to have reached a compromise on the auto bailout. And of course, in the finest tradition of the Democratic Party, the deal was made by caving in to George W. Bush:
WASHINGTON - Jolted by the loss of thousands of jobs, congressional Democrats and the White House reached for agreement Friday on about $15 billion in bailout loans for the beleaguered auto industry. President George W. Bush warned that at least one of the Big Three carmakers might not survive the current economic crisis.
Several officials in both parties said a breakthrough on a long-stalled bailout came after House Speaker Nancy Pelosi bowed to Bush's demand that the aid come from a fund set aside for the production of environmentally friendlier cars. The California Democrat spoke to White House chief of staff Josh Bolten during the day to signal her change in position, they added.
The developments came as desperate auto executives pleaded for a second straight day with lawmakers for loans to help them survive, and the government reported the worst single month’s job loss in 34 years.
I liked Barney Frank's take. Saying we only have one president at a time greatly overstates the number of presidents we have. Why Nancy and company continue to do the lame duck's bidding is beyond me. The funds have to be given, but I can't for the life of me understand why the money couldn't have come from Henry Paulsen's $700 billion kitty. By the way, should it trouble us that the incoming Treasury Secretary reportely would like to get rid of the FDIC chairwoman, Sheila Blair, who has been the sole voice crying out for direct help to homeowners? (BTW Team Obama denies...)
From Jack Welch on the overly solicitous "Morning Joe" this morning, to Sen. Robert Bennett of Utah a few minutes ago during the automakers hearing, the consensus on the right is that to save the American auto manufacturing industry, step one is to break the United Auto Workers Union. Step two: break American workers and force them to accept the model set up by Japanese automakers who operate in "right to work" (read: "right to pay you crappy wages") states in the American South. That model involves highly automated plants staffed by fewer, low skill, modestly educated workers, who make nearly half what GM, Chrysler and Ford workers, who are more skilled, and operate more technical machinery, earn per year. And no, it's not $70 an hour. That's a read herring. It's more like $28 on average, $14-15/hour to start.
Welch's latest Business Week column is out, in which he proposes that the U.S. automakers be shuttled into bankruptcy, with the federal government assuming stewardship of the various warranties offered on their cars. That way, Welch told his drooling, sycophantic audience on the set of "Morning Joe," the Big Three can finally rid themselves of the UAW, break their union contracts, and void the contracts they currently hold with suppliers. The beauty of Welch's idea is that it crushes middle class wages, and kills off the suppliers, too, forcing U.S. manufacturers to seek parts overseas, where workers make the preferred wage: subsistence. And of course, Welch also proposes the favored strategy of the "free marketeers": consolidation:
Talk about a fresh start. For more than a decade, U.S. carmakers have chipped away incrementally at massive legacy costs. But reorganization would open the doors to meaningful structural change through the renegotiation of contracts with creditors, dealers, and unions. And it would offer better odds of paying back taxpayers.
Once in Chapter 11, a merger would further galvanize real change. Three companies are too cumbersome to unite, and Ford has a two-tiered, family-owned structure, so we'll leave them out of this for now and propose GM and Chrysler join forces. Such a merger could create $15 billion in synergies from reduced capacity and overhead, money that could lower production costs and boost R&D spending. Granted, GM and Chrysler could lose share during the transition, but a merged entity would still end up with more than a quarter of the U.S. market.
Bennett, who pushed hard (video) for the passage of the Wall Street bailout and who brags about it on his website,, just sent my jaw dropping by proposing during the hearing, by proposing that instead of giving loans to the Big Three, the government give still more money to the banks, since after all, they are the ones to whom most of the automakers' debt is owed, and in his words, they "won't bee too happy" with the notion of switching out their debt holdings for equity in the companies. Wow. So the answer is: give more money to the very banks who brought us to the brink of economic collapse, since they, unlike the grunts in Detroit, are white collar, highly paid money changers.
Nancy Pelosi and her wussy counterpart from Joe Lieberman's very own, personal Senate lay down the law to automakers, demanding from them the same thing a bank would before lending anyone, let alone such a dubious client, money: a business plan.
Democratic leaders said Thursday that they want the struggling American car manufacturers to submit a business plan in the next two weeks in order to receive billions of dollars in emergency aid from the federal government.
Senate Majority Leader Harry Reid (D-Nev.) and House Speaker Nancy Pelosi (D-Calif.) said they would return in December to review the plans, which are due by Dec. 2. Congress would then return on Dec. 8 to consider a proposal to help the auto industry.
The leaders made the announcement after saying they would not accept a deal, worked out by Republican and Democratic senators from Rust Belt states, that would lift restrictions on $25 billion in money previously approved to help automakers retool their plants to make more fuel-efficient cars.
“Executives for auto companies have not been able to convince this Congress or the American people that this bailout will be the last,” Reid said.
Instead, they want automakers to come up with a plan that shows how they would use the money.
“Until they show us a plan, we cannot show them the money,” Pelosi said.
Sorry, Hillary. This is the most powerful woman in America
Nancy Pelosi could sure teach Harry Reid a thing or two about wielding power. If you doubt for a second that she is the most powerful woman in the country, ask yourselves two questions:
1. Who did Nancy Pelosi support for the chairmanship of the powerful House Energy and Commerce Committee: fellow Californian Henry Waxman, or John Dingell, who has held the gavel, or been the ranking member, for a quarter century, and who is the longest serving member of the House? Answer: Waxman.
2. Who is going to be the chairman in the 111th Congress? Answer...
The major shift in the leadership also represents a triumph for the left wing of the party, over the doctrinaire old guard. As the Christian Science Monitor puts it:
The 255-member House Democratic conference voted 137 to 122 Thursday to replace Rep. Dingell, a close ally of the auto industry, with Waxman, a longtime champion of environmental causes. The vote places Waxman in charge of a panel with one of the broadest jurisdictions of any congressional committee, responsible for legislative oversight relating to consumer protection, food and drug safety, air quality, energy supply and transmission, telecommunications, and a host of other matters relating to interstate and foreign commerce.
Environmentalists are praising the outcome, which was unusual in that it defied Congress’s seniority system. Dingell, the House’s longest-serving member, assumed office in 1955 and has chaired the energy committee for 28 years.
“Waxman’s victory is a breath of fresh air – of clean air,” wrote Frank O’Donnell, president of Clean Air Watch, an environmental advocacy group. “It was a stunning defeat for the corporate lobbyists on K Street.”
“This is huge for those who’ll want strong action on both climate change and clean energy and energy independence (and health care)” wrote Joseph Romm, a former Clinton energy adviser and a blogger for the Center for American Progress, a think tank headed by John Podesta, Bill Clinton’s former chief-of-staff. “Heck, it’s the second best piece of news on global warming this month!”
Dingell had long opposed measures the auto industry didn't like, like increasing CAFE standards or increasing gas mileage (or building electric cars.) Yet another single that if they want help, Detroit will have to make major changes, and not by slashing the incomes of their employees.
Have you noticed the concerted effort, on talk radio, in the Wall Street Journal, and on the political right, to blame the Big Three auto makers' woes, not on the management whose bloated salaries and bad decisions helped get their industry into the fix their in, but rather on "greedy," unionized workers, who over the years demanded too much pay, and too many health and retirement benefits, all via their evil union, the United Auto Workers? A sample:
Sen. Jim DeMint: “Some auto manufacturers are struggling because of a bad business structure with high unionized labor costs and burdensome federal regulations. Taxpayers did not create these problems and they should not be forced to pay for them.”
Sen. Jon Kyl: “For years they’ve been sick. They have a bad business model. They have contracts negotiated with the United Auto Workers that impose huge costs.The average hourly cost per worker in this country is about $28.48. For these auto makers, it’s $73. And for the Japanese auto companies working here in the United States, it’s $48.”
Gov. Arnold Schwarzenegger: “You know, if you pay the auto workers or the benefits and all of those things, are maybe too high. … We have, like, in America, you sell a car, and you have $2,000 of each car just goes to benefits. So I think that there’s a way of reducing all of that, make them more fiscally responsible.”
And this from right wing CNS News, whose Dan Gainor says a proposed bailout:
... has little to do with saving Detroit and a lot to do with helping out the Democratic Party’s political machine. The chief recipient of this deal isn’t the companies, it’s the union. A bailout of Detroit would secure that the Big Three continue to fail and pay exorbitant sums to thousands of union workers.
The Los Angeles Times says unions funded the Democratic victory to the tune of more than $80 million just this election. The San Francisco Chronicle puts the number a bit higher – $450 million. Either way, they want their payback. They already have two things in mind – eliminating secret ballots in union elections and saving their 139,000 brothers and sisters in the United Auto Workers.
So let me get this straight: it's a bad thing for the American blue collar worker to reach for the highest wages and best benefits he can get, but fine for the CEO of his company to make 400 times his salary? And by the way, these are the same types who advocate ever increasing tax cuts for CEOs, who deserves the break, apparently, while the working screw deserves a pay cut. That's one of the tenets of right wing economic theory: that CEOs should be able to amass huge, tax-free fortunes, and be trusted to "trickle down" the benefits to the slobs who work for them. I suppose Kyl and Gainor and friends would rather see American workers paid more like the workers in "more efficient" countries, like India? As Pat Buchanan put it recently, it used to be a badge of honor in this country that our workers were the best paid, hardest working people in the world. Meanwhile, as ThinkProgress points out:
Financial firms AIG, Merrill Lynch, and Bear Stearns did not have unionized workers but still suffered economic collapses. Frozen credit markets and a spiraling recession were major contributors to Detroit’s current state.
And the financial services firms pay a hell of a lot more than Detroit. The ethos of the Republican right -- that the wealthy should have unlimited earning potential, but average Americans are "greedy" if they want the same thing, and that tax cuts should be weighted always toward the wealthy, who shouldn't be punished, while workers should, at all costs, be prevented from unionizing, and thereby gaining wages and benefits that rightly belong to their betters. No wonder Republicans have lost everyone in this country who isn't dumb enough to cheer for his or her own demise.
If the Henry Paulson press conference yesterday bugged you, you're not alone. I'm still not clear on what, exactly, this guy has done with $300 billion of the $700 billion, or was it $1.2 trillion, he was shoveled by Congress to "save the banks." Now, we're not buying their worthless assets? Oh, and there has been no oversight? Brilliant! Now, there's a big push on, including from the in-coming administration, to bail out the Big Three U.S. auto-makers, whose bad decisions and bad products (try selling a Hummer in Europe. I dare you) over three decades or so got them into the mess they're in. All are headed to Capitol Hill with tin cups in hand, but many in the real world are asking why they should get another $25 billion in government loans (they got that amount before. Did you know that?) from the same taxpayers they've been screwing with their crappy cars?
And as they will, Wall Street Journal types want the bailout, but they want the pensioners, who slaved away in the plants for a quarter century and were promised a decent retirement, to take one for the team. Figures. And Michigan's attractive governor, who can't run for president because she's Canadian, might be in line to be the nation's "car czar," something she earned by being a loyal Obamacrat during the campaign. Great for her. She deserves it. Now, back to the bailout. Why should we do it? (And why not just let the automakers declare bankruptcy, like millions of Americans have had to do? A pro-bankruptcy argument here, and GM's rebuttal to that here.) Five arguments you'll hear today:
1. Detroit is "too big to fail." The industry employs, directly or indirectly, more than 3 million Americans. If GM, Ford and Chrysler (who the hell buys a Chrysler anymore...?) go down, they take their workers, and the restaurants, supermarkets, stores and schools their families patronize, with them. As Dem strategist Peter Fenn puts it:
Let's put aside the 3 million jobs that would be lost in the first year, that 1 in 10 American jobs depend on the industry, that there would be lost wages of $150.7 billion or we would lose $156 billion in taxes paid over three years. Let's look down the road. Do we really want to deep six the cornerstone of American manufacturing when only 13% of the world's population drives cars and this is one of the greatest growth industries of the 21st century?
2. It's not a bailout, it's an opportunity. Any bailout pushed through Congress would likely force Detroit to do what it has resisted for generations: retool and modernize, produce "green" cars that get 40 mpg, and yes, even the electric car they bought up and killed during the 1980s.
3. We must save the workers to save the Obama agenda. Ford has announced it's "temporarily" closing 11 more plants. And GM parts suppliers, even NASCAR, hang in the balance if the Big Three fail. If a failed U.S. auto industry ripples through the economy, it could multiply the potential job losses from 3 million to three times that number. Try doing anything on Obama's list with a cratering tax base.
4. We're not doing much else with the money. The bank bailout is already a hot mess. Henry Paulson can't seem to figure out what else to do, so we might as well do this.
5. 2012. Michigan is a reliable blue state. Democrats owe them, and will need them to re-elect President Obama in four years, especially with a Mitt Romney re-run looming. Okay, a crass argument, but politics is crass.
From the NYT this morning, a leak the president did not approve of:
The struggling auto industry was thrust into the middle of a political standoff between the White House and Democrats on Monday as President-elect Barack Obama urged President Bush in a meeting at the White House to support immediate emergency aid.
Mr. Bush indicated at the meeting that he might support some aid and a broader economic stimulus package if Mr. Obama and Congressional Democrats dropped their opposition to a free-trade agreement with Colombia, a measure for which Mr. Bush has long fought, people familiar with the discussion said.
The Bush administration, which has presided over a major intervention in the financial industry, has balked at allowing the automakers to tap into the $700 billion bailout fund, despite warnings last week that General Motors might not survive the year.
... Mr. Obama went into his post-election meeting with Mr. Bush on Monday primed to urge him to support emergency aid to the auto industry, advisers to Mr. Obama said. But Democrats also indicate that neither Mr. Obama nor Congressional leaders are inclined to concede the Colombia pact to Mr. Bush, and may decide to wait until Mr. Obama assumes power on Jan. 20.Separate from his differences with Mr. Bush, Mr. Obama has signaled to the automakers and the unions that his support for short-term aid now, and long-term assistance once he takes office, is contingent on their willingness to agree to transform their industry to make cleaner, more energy-efficient vehicles.
The question remains whether Detroit, which made its own bed, let's not forget, but which employs nearly 3 million Americans, can wait that long. General Motors stock price is wading into Radio One territory (well, it's not quite that bad, but shares did fall below $3...) and there's a good chance the shares might actually become worthless. And the ripple effect from auto industry layoffs is kicking retailers in the gut.
Meanwhile, back to that presidential pique: Drudge reports that Dubya ain't happy with the leaks about his meeting with the Big O (no word yet on how Laura did with his "good bride...")
Bush advisers view the leaks as an effort to undermine the president's remaining days in office.
"Senator Obama may not be familiar with a long-standing tradition of presidents holding their private conversations, private," a senior adviser explained to the DRUDGE REPORT.
Developing indeed. But it's not as if the White House didn't release its own information about the meeting, even if it was entirely benign and fluffy. And Bush's continued hawking of the Colombia free trade deal seems entirely out of step, while the nation's homeowners, employers and employees are facing an immediate crisis, which importing more coffee and bananas at low, low prices can't possibly solve. Kind of lets you know how we got here.
Detroit Mayor Kwame Kilpatrick has been indicted on various charges (13 in all, I think,) including conspiracy to obstruct justice, obstruction of justice, misconduct in office and perjury. His former aide, Christine Beatty, with whom he allegedly had an affair, has been indicted too. The Freep isn't updated yet, but I'm sure soon will be. Kilpatrick will respond at noon.
The announcement follows an eight-week investigation that was prompted by a Jan. 23-24 Free Press story that revealed the existence of text messages showing that the mayor and his then-Chief of Staff Christine Beatty lied at last year’s police whistle-blower trial when they denied having an extramarital affair.
The messages also showed that they provided misleading testimony about firing former Deputy Police Chief Gary Brown in 2003 after he and former mayoral bodyguard Harold Nelthrope began asking questions about a rumored wild party at the mayoral Manoogian mantion and alleged misconduct involving the mayor’s security team – questions that threatened to expose the sexual affair.
Despite the false testimony, a Wayne County Circuit Court jury last September awarded Brown and Nelthrope $6.5 million in damages. Kilpatrick vowed to appeal, but on Oct. 17, abruptly decided to settle the case and a second police whistle-blower suit involving former mayoral bodyguard Walt Harris for $8.4 million – $9 million with legal costs.
Kilpatrick settled after the cops’ lawyer, Mike Stefani, informed the mayor’s lawyer that he had the incriminating text messages and would reveal them in court papers he planned to file to justify his request for legal fees in the whistle-blower case.
Although Kilpatrick apologized for his conduct in a televised appearance with his wife, Carlita, in late January, he has blamed the media for his troubles and rejected calls from the City Council, Attorney General Mike Cox and city union locals to resign.
The big question now is whether Kilpatrick will resign. You'd think he has too, now, though we are talking about black politics, where almost anything is possible... He could face up to 15 years in prison on the multi-count indictment.
DETROIT - Mayor Kwame Kilpatrick, a one-time rising star and Detroit's youngest elected leader, was charged Monday with perjury and other counts after sexually explicit text messages surfaced that appear to contradict his sworn denials of an affair with a top aide.
Wayne County Prosecutor Kym Worthy also charged the popular yet polarizing 37-year-old mayor with obstruction of justice and misconduct in office.
Former Chief of Staff Christine Beatty, 37, who also denied under oath that she and Kilpatrick shared a romantic relationship in 2002 and 2003, was charged with perjury and obstruction of justice.
In all, Worthy authorized a 12-count criminal information.
"This case was about as far from being a private matter as one can get. Honesty and integrity in the justice system is everything. That is what this case is about," Worthy said at a news conference.
"Just when did honesty and integrity, truth and honor become traits to be mocked, downplayed, ignored, laughed at or excuses made for them? When did telling the truth become a supporting player to everything else?"
The charges could signal the end of Kilpatrick's six-year career as mayor of one of America's largest cities.
Perjury is a felony, punishable by up to 15 years in prison. But for Kilpatrick, a conviction also would mean his immediate expulsion from office. The Detroit City Charter calls for any elected official convicted of a felony while in office to be removed.
Kilpatrick has said he would not resign and last week said he expects to be vindicated when all aspects of the scandal are made public.
The mayor was expected to hold a news conference at noon.
Worthy said she expected the mayor and Beatty to turn themselves in by 7 a.m. Tuesday.