4rd UPDATE: Treasury Details Auto Bailout,Compensation Restrictions
The government's offer of $17.4 billion in financing for the auto giants stipulates that they must bring compensation for their U.S. workers to a level competitive with that of their Japanese rivals by the end of 2009.
Earlier in the day, the U.S. Treasury had said compensation - including wages and benefits - would need to equal that of Nissan Motor Co. (NSANY), Toyota Motor Corp. (TM) or Honda Motor Co.'s (HMC) American Honda Motor Co. The department then changed its stance, saying it had identified an error it wanted to correct to make terms of the package consistent with its intent.
The Treasury, however, hasn't specified what level of compensation it would consider competitive with Nissan, Toyota and Honda.
"There's going to have to be a lot of investigating in terms of what's competitive," said Michelle Krebs, editor of Edmunds Auto Observer.
Still, House Financial Services Committee Chairman Barney Frank is calling the stipulation "an unfair assault on working men and women" that could force them to accept "a disproportionately large reduction in what is currently legally owed to them."
The provision, Frank said, "could give foreign auto companies in effect the ability to dictate wages for all America auto workers."
He already is pushing for President-elect Barack Obama to change that portion of the emergency loan package, something the Treasury said the incoming administration will have the power to do.
"Because these provisions are unnecessary to achieve our goal and because they were unilaterally inserted by the president into what was otherwise a negotiated agreement, I believe that the incoming administration and the Congress should take whatever steps are necessary to remove them," he said.
The United Auto Workers Union also has criticized the idea of cutting employee compensation. "While we appreciate that President Bush has taken the emergency action needed to help America's auto companies weather the current financial crisis, we are disappointed that he has added unfair conditions singling out workers," UAW President Ron Gettelfinger said in a statement.
But David Cole, chairman of the Mich.-based nonprofit Center for Automotive Research, isn't sure how big of an issue a compensation cut might be to rank-and-file GM and Chrysler employees. "I think they were so fearful of a bankruptcy that some modest adjustment is not going to be a problem," he said in an interview Friday.
However, the rules governing the work performed by GM and Chrysler employees would also need to be brought in line to match those governing U.S. employees of Toyota, Honda and Nissan, according to loan terms the Treasury released Friday. It's a provision that Edmunds' Krebs said could be a challenge to meet.
"We don't know a lot about the work rules at places like Toyota and Honda because they aren't transparent about it," she said.
In addition to providing details on changes to compensation structures, the loan terms spell out when funds will be released to the auto makers and other restrictions with which they would be required to comply.
The loans come with the same executive compensation restrictions placed on banks and other entities receiving government funds through TARP. Additionally, the restrictions prohibit bonus or incentive payments to the 25 most highly compensated employees without approval from U.S. Treasury Secretary Henry Paulson, the presidential designee who would oversee such decisions for the remainder of President George W. Bush's term.
General Motors and Chrysler are set to begin drawing loan dollars Dec. 29.
According to the Treasury documents, GM will receive the bulk of the government's $17.4 billion loan package arranged under the Troubled Asset Relief Program. The auto giant is set to draw $4 billion in government loans on Dec. 29, followed by another $5.4 billion on Jan. 16, 2009. Should Congress release a second set of TARP funding, the company would get an additional $4 billion in loans on Feb. 17.
Accessing more TARP funding could be a challenge, however, as Congress has been critical of how the Treasury has handled the first $350 billion in funding under the initiative. For Treasury to access the remaining $350 billion in available TARP funding, the White House must send Congress a plan detailing how the money would be spent. That submission would start a 15-day window in which Congress has to vote to disapprove access to the money.
The White House could veto and overrule a congressional vote, but Congress also could overturn that veto.
Chrysler is set to borrow a total of just $4 billion from the government and would be able to borrow up to that amount on Dec. 29.
Interest on the loans is currently set at 5%. In the event of a default, interest rates could rise to 800 basis points above either Libor or 2%, whichever is greater.
The companies also must show the White House they are "taking all reasonable steps" to sell aircraft or interests in aircraft. And they must provide plans to control their expenses that would include details about spending on holiday parties, travel and new real estate. The companies also would need to get White House approval for asset sales and other transactions of more than $100 million.
The companies would need to provide the government with restructuring plans by Feb. 17, 2009. Those plans would need to show the companies and their subsidiaries have used their best efforts to reduce outstanding unsecured public debt, with the exception of pension and employee benefits obligations, by two-thirds.
The companies would need to provide the government with weekly status reports, beginning this week. The reports would need to detail the companies' 13-week rolling cash forecasts. The companies also are required to provide biweekly liquidity status reports after loan disbursements and monthly certifications of expense policy and compensation compliance, according to the Treasury.
-By Meena Thiruvengadam, Dow Jones Newswires; 202-862-6629; meena.thiruvengadam@dowjones.com
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Publié le 19 Décembre 2008 Copyright © 2008 Dowjones
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