GM and Chrysler are in the throes of negotiations to avoid bankruptcy. GM’s CEO announced on Monday that the company will cut 21,000 more jobs, close 40% of its dealerships, and discontinue the Pontiac brand. Republican Congressman Thaddeus McCotter represents Michigan’s 11th district, west of Detroit. Unemployment is over 13% in his district, and now it looks like things are going to get worse. He join The Takeaway to discuss his perspective on the auto bailout and how he hopes the negotiations will pan out.
"I continue to support keeping as many people employed in Michigan and manufacturing as we possibly can. The alternative to not having this deal goes through is a bankruptcy liquidation." —Rep. Thaddeus McCotter on a merger between Chrysler and Fiat
JOHN HOCKENBERRY: Thaddeus McCotter is a Republican Congressman from Michigan’s 11th district, west of Detroit. Congressman, thanks for being with us.
REP. THADDEUS MCCOTTER: Thanks for having me.
JOHN HOCKENBERRY: Boy, you hear a lot of skepticism and angst on the part of those two workers. I know they’re not in your district, but any response?
REP. THADDEUS MCCOTTER: Well, I think that they’re justified. And this is precisely the cruel uncertainty of the situation we find ourselves in. We’re nearing the end of a deadline in the administration. You’ve seen the UAW, you’ve seen the retirees, you’ve seen even some of the TARP banks come forward to try to make sure Chrysler avoids bankruptcy and can continue in a merger with Fiat. And yet one of the problems that many people on both sides of the aisle have had, is that when you put a 30-day deadline to do something as complex as a merger between two companies with all the outstanding parties that are involved, is that as you try to meet that deadline there could be bumps in the road that are very difficult to overcome. And I think we’re starting to see this out of some of the smaller secured creditors right now.
JOHN HOCKENBERRY: Alright. Congressman McCotter, do you say, though, and will you say to me this morning that this is a deal to keep Chrysler in business?
REP. THADDEUS MCCOTTER: We need to keep Chrysler in business.
JOHN HOCKENBERRY: No, does this deal keep Chrysler in business?
REP. THADDEUS MCCOTTER: Do we have a deal yet? That is the problem. That is why there’s still talk.
JOHN HOCKENBERRY: If this deal goes through, do you think it keeps Chrysler in business?
REP. THADDEUS MCCOTTER: I think that it will. I think that the merger between Fiat and Chrysler is critical to keeping that entity operating and the workers that you talked to employed.
JOHN HOCKENBERRY: Alright, entity operating. Let me get into that for a minute. Isn’t this more like a fire sale, the government liquidating Chrysler to an Italian company in Turin?
REP. THADDEUS MCCOTTER: Well, what you would have to do is ask the administration what its profitability plan is for this, because they set the 30-day deadline with the bankruptcy at the end of it.
JOHN HOCKENBERRY: I’d be happy to ask the administration that.
REP. THADDEUS MCCOTTER: That’s who’s driving this. That’s who’s been driving this since the viability plans were rejected.
JOHN HOCKENBERRY: So do you not support this deal then? It sounded like you did support it a moment ago.
REP. THADDEUS MCCOTTER: I continue to support keeping as many people employed in Michigan and manufacturing as we possibly can. The alternative to not having this deal goes through is a bankruptcy/liquidation.
JOHN HOCKENBERRY: But it seems like we’re already there in a liquidation. Again, I know it’s the Obama administration that’s driving this, but you have to represent constituents. The fate of Chrysler workers in your district is now over in Turin, Italy if this goes through.
REP. THADDEUS MCCOTTER: And what fate do they have if it doesn’t?
JOHN HOCKENBERRY: But the thing that concerns me is that you’re going to say in the short-term, as government officials we’re saving your jobs, but when the Berlusconi cronies over in Turin basically lay them off, then you’re going to say, “Oh, that was Fiat.”
REP. THADDEUS MCCOTTER: Again, the administration determined that Chrysler was not viable as a stand-alone company. That’s their determination. They set in place a 30-day deadline where they had to merge with Fiat or go into bankruptcy. As someone who represents these workers, put in the same position we had no option but a merger with Fiat or a liquidation and bankruptcy, and they lose their jobs.
JOHN HOCKENBERRY: Then I wouldn’t call that a deal. I’d call that extortion.
REP. THADDEUS MCCOTTER: Then you can take that up with this administration. Many of us were very disappointed that they would demand that, that they would reject the viability plans of both GM and Chrysler as they did earlier this year.
JOHN HOCKENBERRY: So do you actually see this as the government liquidating Chrysler to get out from under the question of who is responsible for these workers, and that decision is going to be made offshore?
REP. THADDEUS MCCOTTER: The option that the administration has put in front of everyone is, you will either have a Chrysler/Fiat merger, or you will have a liquidation of Chrysler, period. And this is the policy paradigm in which we have all been put, and in that there is no option for bankruptcy liquidation, where everyone loses everything.
JOHN HOCKENBERRY: Well, listening to what you say, I’d be really scared if I were a GM worker, because the model for GM is a similar sort of liquidation where the government comes in, finances the stockholders and the bondholders out, like was done with Chrysler, and basically pieces of GM get sold off. OK, we don’t have Fiat here, but they’ll find buyers. Is that what’s going to happen with GM? You’ve got many more GM constituents in your district.
REP. THADDEUS MCCOTTER: We don’t know what’s going to happen with Chrysler. You are operating under the assumption that the merger with Chrysler and Fiat results in essentially a de facto liquidation. The UAW, Chrysler and others in the administration would argue that you’re looking at a potential $8 billion investment out of Fiat as North American operations with 4,000 jobs that would come along with it. Your premise may not match with what the outcome of this merger would be if it can get done before the bankruptcy deadline.
JOHN HOCKENBERRY: Alright. But who’s going to control Chrysler when this is over? It’s going to be Fiat. It’s not going to be the UAW, and it’s not going to be the Obama administration, right?
REP. THADDEUS MCCOTTER: The merger would be between Chrysler and Fiat. Fiat… again, part of the problem with setting up a 30-day deadline for merger or for bankruptcy is they undercut the ability of Chrysler and the UAW and in many ways the federal government to try to negotiate to a point where you can have this entity be more mutually controlled by the parties.
JOHN HOCKENBERRY: Tough, tough, tough talk. And very, very difficult to see how these workers are going to survive. But as you say, if we do get to a deal there is a window of hope. Thaddeus McCotter is a Republican congressman for Michigan’s 11th district, just west of Detroit, speaking to us from Washington. Congressman, thank you so much.