Commentary

Sen. Corker: Loan conditions must fix automakers' problems

U.S. Sen. Bob Corker

I came to the U.S. Senate to help solve the big problems facing our country, and my approach to dealing with the Detroit Three automakers' request for federal assistance has been focused in that way -- solving the actual problem.

After extensive meetings with executives from Chrysler, Ford, General Motors, top industry analysts and union officials, it is clear to me these companies must make significant changes to become competitive.

The last thing Washington should be getting involved in are issues like product development and shedding excess capacity -- that should be left up to the boards of these companies. Our role should be swift and simple and centered around two areas where we can force immediate and transformative change: addressing the unworkable capital and labor structures that cripple these companies. I cannot support the proposed loan package as written by Democrat lawmakers and the White House because it doesn't tackle these critical issues.

To that end, I have put forth several measures that need to occur for any government-backed loan to be successful:

• 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.

These are the same types of conditions a bankruptcy judge might require but without some of the stigma and problems that accompany a formal bankruptcy. We need to insist the automakers get their balance sheets right on the front end, or they will be back over and over again and miss this opportunity to become viable and prosperous for the long term.

This is a once-in-a-generation opportunity to leverage changes that put these companies on a path to sustainability and success. There's an old joke that if someone says "We're from the federal government, and we're here to help," you should run for the hills. But in this case, I believe there is a constructive role for the federal government to play.

A "big stick" by the government could actually bring all parties to the negotiating table and ensure that concessions are made quickly and fairly. This would allow taxpayer dollars to be protected and used responsibly, while giving confidence that this is not just a short term solution to a deeper problem.

In my view, success would be a transformation that immediately results in the Detroit Three being able to attract private investment that would in turn allow them to thrive and keep them from having to come back to the federal government in a few months.

The U.S. automobile industry reaches far beyond Detroit. My home state of Tennessee has an extensive and healthy automotive manufacturing presence with a GM plant in Spring Hill that is one of the most modern facilities in the world. Nissan and Volkswagen are also heavily invested in Tennessee, making us an industry hub with a huge supplier base that could be affected as a result of the current situation.

My desire has been to offer a constructive solution that strengthens these companies for the long haul.

No one enjoys a crisis but sometimes it is the best opportunity to bring real reform. It is my sincere belief that requiring fundamental changes as part of a loan package is in the long-term interests of Michigan, Tennessee and our country.

U.S. Sen. Bob Corker, R-Tenn., is a member of the Senate Banking, Housing and Urban Affairs Committee who was a businessman before serving as Tennessee commissioner of finance and administration and mayor of Chattanooga.