Congressman Gregory Meeks Remarks on the Announcement of the U.S. Automotive Loan Rescue Package

(WASHINGTON, DC)– The Bush Administration announced a $17.4 billion loan rescue package to American automotive manufacturers, General Motors and Chrysler. Under the terms of the three year loan package, GM would get $4 billion by Dec. 29 and $5.4 billion by Jan. 16. Chrysler would get $4 billion by Dec. 29. GM would get another $4 billion by Feb. 17, provided Congress releases the remaining $350 billion of the TARP funds.

“The President’s announcement will provide an opportunity for the American automotive industry to become viable and competitive while securing the jobs of millions of Americans,” said Congressman Meeks. “I do remain concerned as to the impact of the White House proposal for the blue collar, organized American workers who have in some respects been asked for what may prove to be a disproportionate level of sacrifice in comparison to other automotive stake holders. It is critically important that the development of the restructuring plans proceed in a fair and equitable manner and that the necessary sacrifice be mutual, and all laws governing fuel efficiency, emissions and improvements in automotive technology be preserved,” added the Congressman. “My colleagues and I, who will be seated in the 111th Congress, along with President Elect Obama, stand ready to work with all parties during this difficult restructuring to restore the domestic auto industry, help revitalize the national economy, and secure millions of U.S. jobs.”

Under the terms of the plan, the government’s debt would have priority over any other creditors. The automakers also must provide warrants for non-voting stock, accept limits on executive pay, and give the government access to financial records. No dividends may be issued until the loans are repaid. In addition, the automakers must cut their debt by two-thirds in an equity exchange.

For workers, GM and Chrysler would be required to make half of the payments to a union retirement fund in equity and eliminate a program that pays union workers when they don’t have work. Unions and management would have to negotiate a plan to have compensation and work rules in place by Dec. 31, 2009, that will make the U.S. companies competitive with foreign automakers. The requirements could be modified by negotiations with the union and debt holders. GM and Chrysler will pay at least 5 percent on the loans, and would pay 3 percentage points over the London interbank offered rate should Libor exceed 2 percent. As part of the conditions with the bailout General Motors and Chrysler must use these funds to become financially viable. If the U.S. automakers have not attained financial viability by March 31, 2009, all funds will be returned to the Department of Treasury.

“Due to the severe economic crisis I believe that it was necessary for the White House to step in to ensure the continued operation of the U.S. auto industry and prevent the losses of more American jobs. This loan package will help to strengthen not just the U.S. auto industry, but our economy as a whole. With the exchange of the loan by the Department of Treasury it is imperative the U.S. auto industry prepare plans to restructure their companies to build more competitive, fuel-efficient and technologically-advanced vehicles while providing the utmost protection to American taxpayers,” said Congressman Gregory Meeks.
Now serving in his sixth full-term, Meeks was elected to the House on February 3, 1998. Representing New York's Sixth Congressional District in the United States House of Representatives, Meeks' district covers all towns of Southeast Queens, Far Rockaway and Howard Beach. He is a member of the House Committee on Financial Services and the Committee on Foreign Affairs. Meeks is a Member of the Congressional Black Caucus (CBC), New Democrats Caucus and the Democratic Leadership Council (DLC). He serves as the Co-chair of the Malaysia Caucus, Services Caucus, Dialogue Caucus and the Middle East Economic Partnership Caucus.