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A transcript sent to us from Senator Bob Corker’s office of his questions & statements to auto executives, after the jump.

UPDATE BEFORE YOU JUMP: After reading this transcript, Jackson, Tennessee blogger ‘Right at Home’ (which we’re adding to our blogroll) says, “I’ve been very critical of Senator Corker as a result of his vote for the $700B bailout package. Over the last couple of days, however, Senator Corker has shown the kind of thoughtful, responsible economic conservativism that we elected him for.”

WASHINGTON, D.C.  U.S. Senator Bob Corker (R-TN) on Tuesday attended a Senate Banking Committee hearing with testimony from the CEOs of the Big Three U.S. automakers, Ford, Chrysler and General Motors.

The Banking hearing entitled Examining the State of the Domestic Automobile Industry included testimony from U.S. Sen. Debbie Stabenow (D-Michigan), UAW (United Automobile Workers union) President Ron Gettelfinger, Ford Motor Company President and CEO Alan Mulally, Chrysler Chairman and CEO Bob Nardelli, General Motors Chairman and CEO Rick Wagoner, and business professor Dr. Peter Morici of the University of Maryland.

A transcript of Corkers Q&A follows.

CORKER:

Mr. Chairman, thank you. And I want to thank our witnesses for being here today, and certainly the senator from Michigan.

In listening to the opening statements by many and just by reading the tea leaves, my sense is that probably nothing’s going to happen this week. And this is sort of the beginning of a loan application, if you will, or an application for equity injection. This is the beginning, and that in fact probably in January you’ll be back.

I know most of us have read the data on the companies and realized, by the way, that these companies are not homogenous. I mean these are three very different companies that have very different criteria that they are dealing with.

And I hope that today you will begin giving us a glimpse as to what each of the companies individually are doing. I realize that Ford may be in better shape because of some things they’ve done a few years ago. But I hope you’ll begin doing that.

And I would ask the witnesses, since in essence you’re asking the American public for a loan or equity or whatever it might end up being, I would ask you to be realistic with us.

I know that there’s been continual talk about how Chapter 11 just does not work. We realize there are lots of legacy issues that — that handicap these companies, and — and we understand that.

I’d like for each of you during your testimony to walk us through why that doesn’t work and why you wouldn’t be asking for money from the federal government for a prepackaged reorganization.

I actually wonder somewhat facetiously if in your boardrooms you aren’t hoping that we’ll turn down this — this, so that you have that as an option that you might emerge more strongly — and focus on those things that you do well.

So I hope you’ll talk about all those things. I realize that in all likelihood this is the beginning. I think each of you know that I’m fairly skeptical in looking at this, but I do thank you for being here, and I actually hope — I feel for you if — if — in the fact that hopefully you’re carrying the burden of responsibility of all the employees and the many distributors across the country that are involved in marketing your products.

Thank you for being here.

********************************************

CORKER:

Mr. Chairman, thank you for this great hearing.

And I appreciate all of you being here. And I understand the tremendous problems this is creating in all of our states. We have one of our most respected business people here tonight, that’s one of your dealers, has 300 employees and we understand about all the — the many workers and much employment.

So I do have some tough questions, but I want you to know I do — I do understand the turmoil that this is creating throughout our country.

We’ve talked a lot about the TARP program. And we’ve talked about the fact that we were willing to, quote, “bail out” the financial institutions.

But one of the things that’s occurring in the TARP program that’s not happening here is that the OCC that regulates these banks or the FDIC, if that’s the case, has to certify to Treasury that these are strong institutions. And they actually make recommendations to Treasury as to which institutions are the strong banks, the good banks, and should succeed.

I find it really interesting that we, quote, “have the big three here,” if you will, because I know that all three of you are in different circumstances.

And my sense is, if the OCC was performing the same ordeal, if you will, on y’all, some of you would not be recommended to get credit. My sense is that Ford has done a better job and is in slightly stronger position, that G.M. has made some changes, but is spiraling downward and in serious trouble.

And my sense is — and I could be wrong. I know it’s a private company and results aren’t available, but that Chrysler is just — barely has a heartbeat.

And so I do wonder why we’re talking to three companies in very different situations about all being treated the same way. It seems to me that that premise to begin with is — is very flawed.

Now, obviously, you all have created a pact. You wouldn’t share with Senator Menendez how much each of you have asked. I know that one of you shared with us that you’ve given those numbers to Levin.

But I would like to know exactly what each of you has asked for. And I think that’s only fair. And I think dancing around that is incorrect.

And then I’d like Mr. Gettelfinger, if he would, since he says he went in and looked at these companies, to tell us which of these three should survive and which shouldn’t.

But I’d like to have the numbers first.

(UNKNOWN)

I’d be happy, again, to say…

CORKER:

I just want the numbers. Just give us the numbers that you gave to Mr. Levin to create the…

(UNKNOWN)

Seven billion dollars.

CORKER:

Seven billion dollars. What’s — what’s the number from G.M.?

NARDELLI:

Seven billion dollars.

CORKER:

And the number from G.M.?

WAGONER:

Senator, sir, I think you have to be fair and look at it.

(CROSSTALK)

CORKER:

I just want — of the $25 billion that you’ve asked for, how much of it have you guys decided are going to G.M.?

WAGONER:

We felt that, if we get our proportionate market share of that…

(CROSSTALK)

CORKER:

Well, just give me the number.

WAGONER:

… which would be in the $10 billion to $12 billion that — that we would have a…

(CROSSTALK)

CORKER:

And how much is Ford getting in this three-way pact?

MULALLY:

(OFF-MIKE) $7 billion to $8 billion.

CORKER:

Seven to eight billion? So it’s $7 billion, $7billion to $8 billion and $10 billion to $12 billion? Those are the numbers?

Mr. Gettelfinger, you’ve been into these three companies. They’re all in three and different positions. Some of them are stronger than others for lots of reasons. Rank them one, two, three.

GETTELFINGER:

Being in the best shape to the worst?

CORKER:

Yes.

GETTELFINGER:

I would rank them Ford, Chrysler and General Motors.

CORKER:

OK, I have to say that we’ve gone to 10 million sales a year in our country, and there may not be a need for three automakers. And I just want to say that we’re — we’re going down this road in a really odd way and that, when we went through the financial mechanisms, we actually had the OCC go in and make sure these were going entities.

And I — I just want to say, if we’re going to try to do something this week, we’re bypassing something that to me is an incredibly important thing for us to do as it relates to the taxpayers.

We’ve mentioned section 136. And some people have said that maybe that’s the vehicle we ought to use to fund the automakers, if we do it.

There are two provisions there. One says that you have to be making alternative types of vehicles or alternative energy-type vehicles. The other is you have to show that you’re a going concern and that you’re going to survive.

I assume that, when you applied at 8:43 a.m., and the others of you the same day, that you put in place — there was a plan that was submitted that showed you to be going concerns, is that correct? Because that’s one of the stipulations of — of 136.

WAGONER:

That’s part of the process, yes. I’m not sure that all has to be submitted upfront, but, yes, we’re all aware of it and we’re all doing that analysis.

CORKER:

Now, I would just say to the committee that it seems to me that we would like to at least look at those prior to putting money into these firms.

DODD:

Look at what, Bob? What do you want?

CORKER:

Well, they’re going to have to submit for their 136 application…

DODD:

Yes, right.

CORKER:

… they have to submit something that lays out a business plan that shows that they are a going concern, that they can be successful, that they can pay this money back.

DODD:

A very good point.

CORKER:

And it seems like that, before we would rush to take action this week, we could at least see those, because it’s pretty evident, I think, to all of us in this committee that $25 billion was sort of thrown up on the wall and it stuck.

OK, there’s not been any real thinking behind that number. It’s what might be attained today, OK? I think we all know, if that occurs, they’re going to be back. I don’t think there’s anybody on this committee that believes otherwise.

So it seems to me that we’d be so much better off to actually see these submittals, that you’re going to have to submit to get the 136 money you’re already after. We should judge those, and we should see if you’re actually going concerns.

Now, I was just in Russia last week and noticed that General Motors was opening a plant there, I guess the next day after I was there. And I understand that you make money in Russia. You make money in other places. But you don’t make money here.

And I’d just like to — to ask a very blunt question, if it has something to do with your relationship with Mr. Gettelfinger or the UAW. I mean, what is it that allows you to make money in all these other countries, but not make money here?

WAGONER:

Well, each market, to be fair, has its own circumstances. But in general, we’ve done quite well in most markets outside the U.S. recently.

Part of the reason is a little bit of the issue we discussed earlier, very rapid growth. Frankly, it’s easier to make money when things are growing and when you have to shrink.

And it’s fair to say that, if you look back, you know, over the last 10 or 15 years I mentioned, we’ve had a fairly significant cost to restructure our business in the U.S. And so that’s a fair point.

I think the point we’re trying to make today in our earlier comments, that a lot of that is behind us now.

CORKER:

It’s a pretty big point. But let me just say, you all have been very careful — and I appreciate this — and, Mr. Gettelfinger, I want you to know I’ve been a card-carrying union member and been a trustee, and, you know, I don’t have a, you know, a major issue — I do with card check, of course.

But you — they keep saying that, by 2010, they’re going to be competitive. And I — it makes me think that what we’re doing is loaning these guys possibly money so that, at some point in the future, they’re going to be competitive because of agreements that they have with you.

And I would ask, why not 2009? Why not 2008? Why don’t you go ahead and make the changes you need to make to make them competitive now?

GETTELFINGER:

Well, as one example, Senator, the Voluntary Employee Beneficiary Association, we had to go through a court process after the negotiations. That is a federal court-approved settlement.

Just transferring that over to the union, we have had two trustees meetings to this point in time. But this is major.

Because of the time that it’s going to take for everybody’s eligibility, we have to set up a complete structure, because what we’re doing is we’re creating the Voluntary Employee Beneficiary Association, which has more independent trustees than it does UAW trustees. And we’re going to be responsible for everything. So just the magnitude — we’re on a push now to get this through to 2010.

CORKER:

Yes, Mr. Nardelli had a representative in our office earlier today that was sharing that, even when they’re operating, even when they’re not making cars, when there’s not a demand for cars, in their plants, they have to operate at 80 percent regardless. And I’d like for you to acknowledge whether that’s true or not. And then I’d like to ask you, Mr. Gettelfinger, why that would be the case.

NARDELLI:

Senator, I’m not sure when you say operate at 80 percent, if you’re suggesting that we have to…

CORKER:

I understand you have agreements in place. Mr. Jim Press was in my office earlier today and explaining that — that, in fact, even when your plants are not needed, they have to operate. And there — there have to be some issues that still cause you to lose money unnecessarily.

NARDELLI:

Maybe what he was referring to, Senator, is that there is a contractual obligation that, when we have to idle a facility, that we do have to continue to pay wages at about 95 percent. I think Ron could be more specific than that.

CORKER:

That seems kind of problematic to me — I mean just on the surface. And it seems to me that you’re asking us for $25 billion to support a clause that in no other business in this country would be tolerated.

And I understand the good job Mr. Gettelfinger is doing on behalf of the employees that are not working but still being paid, but I find it very difficult that you’d be in here asking us for $25 billion, which we know is just the beginning, when you have an agreement in place like that that causes you to have to pay 95 percent of the workers that are not working.

CORKER:

Could you elaborate? Or, Mr. Gettelfinger, could you all change that tomorrow before you make another application?

GETTELFINGER:

Senator, first of all, I gave some numbers here earlier on. I have General Motors 9/30/05 had 110,000…

CORKER:

I know what you’ve done. I’m talking about this…

GETTELFINGER:

But they’re not getting paid is the point. We were able to reduce that…

CORKER:

I know what you’re talking about about the bank, but this is a different issue. This is a different issue.

GETTELFINGER:

You’re talking about the sub-pay.

CORKER:

Mr. Nardelli, do you want to explain to him the issue?

NARDELLI:

I think what he may have been alluding to, Ron, is for example, if we have to idle a facility, that we have ongoing labor contractual obligations to pay those employees.

GETTELFINGER:

That’s their unemployment plus…

CORKER:

For — for how long?

NARDELLI:

Ron?

GETTELFINGER:

I’d have to look at the contract.

CORKER:

You got to be kidding me. I’d like to know, and I’d like to know at what expense that is to the companies, but it seems like things like that — let me go back to — to prepackaged bankruptcy.

I have to tell you I don’t understand the stigma that would come with prepackaged bankruptcy, where you knew that you know there was money coming in certain things happen. You lay out a plan, either in 136 or some other way, that laid out how that would happen.

And these changes that are so necessary to cause these companies to be competitive were put in place overnight, not in 2010 or 2011. And again, I got to believe that there is a piece of each of you as CEOs — which I respect, I really do, and I respect the challenges you’re going through — that would almost like to see that happen, but you can’t say it.

I don’t know how that could possibly be detrimental. You have 7,000 dealers across this country. People that sell the same amount of cars have like 1,200 dealers across the country.

It seems to me that that highly problematic and that state laws keep you from doing things that you feel like you really would like to do, but you can’t. It seems like those things are very, very important — and very tangible and things that we ought to be talking about today.

And I’d love a response.

WAGONER:

Well, if I could start, Senator, I’m not an expert in — in bankruptcy, but I have seen research by an independent party as recently this summer, which said that 80 percent of consumers — and it was broken out by brand, so maybe it was 60 for Honda and I think it was 90-plus for one of the brands here at it was about 80 percent for us — would not consider — would not consider buying a car from a company that was in bankruptcy — 80 percent.

If we had an 80 percent — if any of us had an 80 percent reduction in volume, then this idea of a prepack bankruptcy is pure fantasy. If you’re talking…

CORKER:

But the…

WAGONGER:

Excuse me. You’d be talking about a Chapter 7 liquidation…

CORKER:

No, no.

WAGONER:

… which would affect the supply base, affect the other two, and ripple across this economy like the tsunami that we haven’t seen, and it seems like to be a huge roll of the dice to — to weigh that — the risks of that, which I personally believe are very high, against the request we’re making here today, so…

CORKER:

Well, today, but you’re going to come back for more, and I think you all — let me ask you this, then. Would you all make the pledge that if you get the $25 billion, you’ll never be back to see us again?

WAGONER:

Well, I think…

CORKER:

I don’t think you’re under oath, but I’d love…

WAGONER:

Sir, if you could make the pledge to us that the U.S. economy will turn around on a certain point in time, then — and the financial markets will rejuvenate, then we would be glad, based on that data, to come back to you and give you…

CORKER:

You’re going to be back, aren’t you?

WAGONER:

Our exact best estimate of how much financing we think we need, sir. We’d be very glad to do that.

CORKER:

I thank you all.

NARDELLI:

Senator, may I answer your question?

CORKER:

Yes, sir.

NARDELLI:

We did look at two parts of your question, if I may, sir. We did look at prepackaged. We looked at pre-negotiated. We’ve looked at almost every alternative within Chrysler as a privately held company before we came here and ask for support to — to provide a bridge, if you will, through this economic trough.

And to a certain degree, all of these take an extensive amount of time. Certainly in a pre-negotiated we’d have to get all the — all the players, all of the suppliers, all of the vendors, all of the labor. And you can imagine, sir, that would take an extensive amount of time to be able to renegotiate that.

And in fact we are in a very fragile position — Chrysler is, point one.

Point two, I — I think I’d be remiss as being the newest guy in the auto industry, if I didn’t respond favorably to your challenge. Chrysler again has been looking for partnerships. We’re looking for alliances. We’re looking for opportunities to make the auto industry, either within the United States or globally, more efficient.

I don’t think there’s any question that there’s opportunities for more synergies.

There’s opportunities for more sharing, whether good knowledge in 136 — for example, to create a national science center where rather than paying each of us a dollar to develop the same technology, we’d pay $1. That technology would then be transferred over to the auto companies. It would make the $25 billion go further. It would be more cost-effective.

If it became a wholly-owned affiliate, you can get private equity to invest in it and then market that.

So there are many creative ideas I think to your point that the auto industry could look at, but the immediacy of why we are here today is to give us the chance to get through this, and then to look at those on how the U.S. auto industry can be more formidable, can be more competitive, not only to be profitable here in the U.S., but on a global basis.

CORKER:

Well, I know you’re alluding to the fact that you’d like to see a merger between GM and yourselves.

And I don’t know that again, Mr. Chairman, that things like that we shouldn’t force to happen, if they’re going to get this money.

But I’ll stop. I know I’ve taken my time. I thank you. And I thank. I — I asked tough questions. I respect the problems you’re going through, and I thank you for coming today.

Posted in: The Economy • The Senate

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