• May 19, 2009
Ralph Nader, the man who single-handedly sank the Chevrolet Corvair by exposing its safety faults in his book Unsafe At Any Speed, has unexpectedly appeared at the side of General Motors. In a letter written to Senator Chris Dodd, Chair of the U.S. Senate Committee on Banking, Housing and Urban Affairs, and Barney Frank, Chair of the House Committee on Financial Services, Nader warns the Congressmen about the risk of leaving GM's fate in the hands of the Auto Task Force, or what he calls "a small unelected and largely unaccountable group arranged to avoid the Federal Advisory Committee Act."

In truth, Nader is not necessarily sticking up for GM, but as a consumer advocate he's more interested in protecting tax-payers and the thousands -- if not millions -- of families that could be harmed if the Auto Task Force makes a misstep on its march towards an increasingly likely GM bankruptcy. His solution? Get Congress involved through more oversight of the Auto Task Force's decisions and urge the administration to postpone any irreversible decisions until they can be carefully reviewed in Congressional hearings. Of course, this delay would mean that GM needs more bridge loans to survive the interim, but as Nader reminds us, "the virtually condition-free Wall Street" bailout has cost much more. Follow the jump to read Nader's letter for yourself in its entirety.

[Source: Nader.org | Photo Source: Brendan Smialowski/Getty]

Letter to Chairmen Dodd and Frank Regarding the GM Bankruptcy
May 18, 2009

Senator Chris Dodd
U.S. Senate Committee on Banking, Housing and Urban Affairs
448 Russell Building
Washington, DC 20510

Congressman Barney Frank
House Committee on Financial Services
2252 Rayburn H.O.B.
Washington, DC 20515


Dear Senator Dodd and Congressman Frank:

The government-led restructuring of Chrysler and General Motors has been twice delegated -- first by Congress to the Executive, and then by the President to a task force. Formally made up of cabinet officials and high-level political appointees, control over the process has in fact been delegated, without adequate standards, to a handful of special advisers. Thus has the future of a centerpiece of American manufacturing capacity been delegated to a small unelected and largely unaccountable group arranged to avoid the Federal Advisory Committee Act. The Congress must, at the least, reclaim its oversight role in this process, and subject the Auto Task Force's proposals and plans to careful scrutiny before irreversible measures -- such as a GM bankruptcy filing -- are undertaken.

The President has stated that "I am absolutely committed to working with Congress and the auto companies to meet one goal: The United States of America will lead the world in building the next generation of clean cars." That is a laudable sentiment, and it is imperative that this goal be achieved.

But it is not befitting our system of checks and balances for Congress to rely on a presidential statement of good intentions -- particularly when it is a small, informal group of appointed non-experts who are charged with rescuing the auto industry.

The Auto Task Force has guided Chrysler into bankruptcy, and appears on course to do the same with GM. The government overseers are hoping for a quick bankruptcy reorganization, resolution of creditor claims that were not resolving themselves through private negotiation, and emergence of a debt-free company, shorn of encumbering assets, post-bankruptcy.

However, there is enormous risk in such a move. The bankruptcy process may not move as quickly as imagined; it is after all, independent judges who control the process, not the executive branch. Especially if the bankruptcy process lingers -- but even if it does not -- there is a serious risk of impairing consumer purchasing confidence in a once-bankrupt auto company. This was conventional wisdom just six months ago. It is not clear why this conventional wisdom has been abandoned, notwithstanding the government guarantee of GM and Chrysler warrantees.

The matter of impaired consumer confidence deserves much more attention than it has received, at least in any public fashion. Already, reports are emerging of further declines in Chrysler sales after its bankruptcy filing, and of widespread belief among consumers that the company is liquidating.

Lost consumer confidence in GM could quite conceivably overwhelm the "benefits" to the company of eliminating outstanding liabilities. Thus the plans of the task force may prove to be a house of cards.

The bankruptcy route for GM is also likely to have important ripple effects especially on suppliers, with a ripple of supplier bankruptcies likely to follow such a move by GM. Even Toyota has commented to Members of Congress on its concern that a GM bankruptcy will pull down suppliers that sell to both companies. Such a ripple will mean more lost jobs, more pain for communities across the country, and a loss of some the most dynamic and innovative parts of the industry.

It is obvious that GM needs a new direction, and the removal of its CEO was a welcome step. The rest of the incumbent management though, remains in place, raising concerns about the ability of the company to remake itself.

While the company needs a new direction, and probably a contraction, it is not obvious that it needs to contract as much as the secretive task force envisions, and in the ways apparently planned. Before the task force's plans with GM are enacted -- and certainly before the company declares bankruptcy -- Congress should hold deliberative hearings to protect taxpayers' investments and seek answers to these questions, among many others:

* Is the task force right in pushing for elimination of as many brands as it has demanded?

* Is the task force asking for too many plants to close?

* Do GM and Chrysler really need to close as many dealerships as have been announced? Is the logic of closing dealers to enable the remaining dealers to charge higher prices (See, for example, Peter Whoriskey and Kendra Marr, "Chrysler Pulls Out of Hundreds of Franchises," Washington Post, May 15, 2009); and if so, why is the government facilitating such a move? Is it reasonable and fair for GM to impose liability for disposing of unsold cars on dealers with which it severs relations, as Chrysler has apparently done?

* Has the task force evaluated the social ripple effects on suppliers, innovation, dealers, newspapers, banks and others that hold company stock and/or are company creditors, and other unique harms that might stem from bankruptcy?

* Would a government-driven bankruptcy process comport with the rights of owner-shareholders?

* Why has the task force maintained the Bush administration-negotiated obligation for unionized auto workers at GM and Chrysler to accept wages comparable to those in non-unionized Japanese company plants in the United States? This requirement is especially troubling given the low contribution of wages to the cost of a car (10 percent), and that it may set off a downward spiral of wages, with the non-union plants no longer needing to compete with union wages, and union wages following those in non-union plants.

* Is the task force obtaining guarantees that, after restructuring with U.S. taxpayer financing, GM cars sold in the United States be made in the United States? If not, why not?

* How will bankruptcy affect GM's overseas operations, with special reference to China and GM corporate entanglements with Chinese partners? Are they and their profits being exempted from the restrictions and cutbacks imposed on domestic operations? If there is such a disparity, is it reasonable and unavoidable?

* How will bankruptcy affect GM's obligations to parties engaged in pending litigation in the courts with GM regarding serious injuries suffered because of design or product defects?

* What guarantees is the task force obtaining to ensure that the GM of the future invests in safer and more fuel efficient vehicles, and what investments will the new company make in ecologically sustainable technologies? How will a potential bankruptcy filing affect, ignore or preclude any such future investments and commitments?

Among the most worrisome components in the restructuring plan is the willingness to sacrifice U.S. manufacturing, and permit GM to increase manufacturing overseas for export back into the United States. Recent news reports indicate that the company will rely increasingly on overseas plants to make cars for sale in the United States, with cars made in low-wage countries like Mexico rising from 15 to 23 percent of GM sales in the United States. For the first time, GM plans emerged to export cars from China to the United States, in what may be a harbinger of the company's future business model; although the company has stated after negative publicity that it will not export from China, there is no evidence that it is abandoning the business model of outsourcing production for the U.S. market, and questions remain about how binding is the recent commitment not to export to the United States from China.

Not surprisingly, industry analysts have quickly weighed in to emphasize that "political considerations" should not interfere with obtaining purported "efficiencies." But such talk is gibberish in the context of a government bailout. What is the point of the U.S. government bailing out GM if not to respond to the political considerations of preserving jobs, communities, manufacturing capacity and directing the mismanaged company to an ecologically sustainable future?

Will the U.S. Congress abdicate its responsibilities while such plans are finalized by the delegated task force? Such a willful abdication would contrast starkly with the dutiful legislative hearings and legislation regarding the Chrysler bailout in 1979.

At the very least, the Congress must exercise its oversight powers. It should, at the very least, urge the Obama administration to defer any plans for bankruptcy or other irreversible moves until after the task force plan has been subjected to close and careful review via thorough Congressional hearings. If delay requires some additional bridge funding for GM, surely such funding with suitable equity positions is appropriate, in light of the potential risks of bankruptcy to millions of families and further governmental relief programs, and the vastly greater sums that have been so recklessly expended on the virtually condition-free Wall Street bailout.


Sincerely,

/s/ Ralph Nader

/s/ Robert Weissman

P.O. Box 19312
Washington, DC 20036
202-387-8034


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  • 29 Comments
      • 5 Years Ago
      “Ralph Nader, the man who single-handedly sank the Chevrolet Corvair…”

      GM was already in the process of replacing the Corvair with a more conventional vehicle when Unsafe at Any Speed came out. GM’s cost accountants never liked the expensive-to-build Corvair because it wasn’t competitive profit-wise with rivals from Ford and Chrysler (the Ford Falcon / Mercury Comet and Plymouth Valiant / Dodge Lancer respectively). The Chevy II (later Nova) that came out in ’61 or ’62 was intended to replace the Corvair, and Nader’s book was just an additional nail in that model’s coffin.
      • 5 Years Ago
      Nader may have sunk the Corvair; however, he makes a very important point:

      Let's not underestimate the impact of a bankruptcy. The final decisions will not be made by Henderson, Congress, Obama or the task force. They will be made by the customers who will decide whether or not they keep on purchasing a GM or Chrysler product.

      All of this fancy boardroom talk, clean balance sheet, stakeholders sacrifices don't mean a thing if the customers shy away from those corporations.

      The media gave in too easily into rhetorical benefits of a "surgical bankruptcy". Any surgery has inherent risks, potentially lethal. Nader is absolutely right: a surgery is irreversible, and cutting too much will prevent those corporations to do well when the market will get to their normal levels around 14-16 M units.

      This letter is one of the best analysis I have read since the feds took over GM's fate.
      • 5 Years Ago
      Nader, you are a damned moron, if you think MORE government involvement is going to help ANYONE besides those in government!!!

      I think things in the news appear to be spinning faster and faster, because it is swirling the drain.
        • 5 Years Ago
        You folks still allow this raving lunatic to roam the streets? How could you possibly make a dinosaur like GM even slower to react to market changes? Make them discuss it with a congressional committee. Then there is the part about wanting guarantees that all the cars GM sells in America be made in America? I guess he never heard of the Autopact or Free Trade? I am sure forcing GM to move Aveo production to a Union plant in Michigan is going to help them compete with Hyundai. I really hate stupid people.

        I am really starting to think that by the time the government is finished adding "conditions" to GM it will have no prayer of ever being competitive ever again.
        • 5 Years Ago
        Agreeded. Total moron.

        "Government oversight is inadequate so we need more government oversight"

        Go away Nader. Go far away.
        • 5 Years Ago
        Just pointing out that without Government involvement the country would be in shambles right now. GM would be Chapter 7, which would have cause about 3 million jobs to be lost. Still stupid?

        And as for a dinosaur that GM is! When any company becomes massive, they are slow to move! All of them! For everything you want to change as a global company, the cost of doing it and the people to do it is exponentially larger! It cost McDonald's BILLIONS to paint their shops and they make burgers! GM makes cars!

        Buy a Ford!!!!!! GM is done! And I'm not EVER buying anything from GM if taxpayers money is forgotten!

        • 5 Years Ago
        Nader should be the last person to speak; he's part of the reason GM is in this mess.

        In the early 1960's, two companies were developing radical new car concepts. They both employed fuel-efficient, turbo-charged, air-cooled, rear-mounted engines. One company had developed a number of variants to produce off the common platform: coupe, sedan, van, pick-up.

        Porsche developed the 911, widely acknowledged for is dramatic (to be polite) handling.

        GM developed the Corvair, which Nader demonized. The Corvair is today acknowledged to have been a relatively safe car after all...

        Nader's FUD killed one of the most promising small car platforms.

        http://en.wikipedia.org/wiki/Chevrolet_Corvair
        • 5 Years Ago
        I don't normally agree but you're 100% right on this, even MORE hands in the pot? decisions made by quorum? not so much. I think people are loosing sight of the FACT that toyota, honda, everyone will continue to innovate, that GM isn't aiming at a fixed target and this sort of bloat will not help.
      • 5 Years Ago
      I think everyone here missed the point.

      Nader doesn't want the Auto Task Force to help GM make decisions. They are an un-elected group of officials that get to decide the outcome of GM.

      He beleives it would be more democratic if the elected officials in Congress chose the fate of GM instead.

      I am not sure why everyone bashes on Nader. He is a consumer advocate. He is looking out for all of us consumers.
        • 5 Years Ago
        ""Nader doesn't want the Auto Task Force to help GM make decisions. They are an un-elected group of officials that get to decide the outcome of GM.

        He beleives it would be more democratic if the elected officials in Congress chose the fate of GM instead.""



        Unfortunately, what you'd wind up with is GM being run like a defense contractor with political considerations taking precedence over business considerations.

        Imagine how profitable GM will be if every model change or plant closing will be decided based on what congressional district the plant is located in.

        GM can't make cars the way Bell Helicopter makes V-22 Ospreys.
        • 5 Years Ago
        Oh, because pedantic congressmen beholden to special interest, and with a penchant for self-aggrandizement are SO much better.

        Whether the government, or agents of the government, they should keep their filthy hands the hell off, and let the market enforce efficiency on private enterprises.

        Thomas Jefferson said it well, IIRC, The government that governs LEAST, governs best.
      • 5 Years Ago
      I've been a Nader Fan for 30 years, If Nader had been President for the last 8 years we wouldn't be in the mess we are in today, Many Corrupt Wall Street, Real Estate and Banking practices would have been axed, while some call him a Moron I believe he truly cares for Americans.

      Ralph Nader bring's up some excellent points, China being Number one for me, I refuse to buy a so called American car full of Chinese parts, Why should we use our Tax Dollars to support GM China and its jobs.

      Why do we call Mexican and Canadian built Domestic brands American, That's just dumb, Its what GM, Ford and Chrysler want people to believe, If its built outside of American borders its an import.

      I do think Chrysler and GM are making a big mistake closing so many dealers, it can only mean reduced sales, the more locations you have the better chance of a sale.
        • 5 Years Ago
        Yea Phil cause thats not just making up facts or anything... You have NO proof that he would have been able to enact his policies in a way that would have done anything. So yea just keep making stuff up. Take a civics class. You have no idea how the govt works, just how you think it should work.

        Does he care about Americans while he spittles and drools out of the corner of his mouth? I cant believe that I wrote a paper supporting what this guy did when I was younger. Oh well live and learn. Nader is an outright idiot. Possibly dumber than the current president if thats possible, with no understanding of the American economic system or Constitution. He views both as an obsticle to be overcome in the courts. He has proven he is willing to sacrafic innovation and new ideas at the alter of "consumer advocacy."

        Ralph Nader is and always has been a joke.
        • 5 Years Ago
        I hear you loud n clear Dave, and you have no proof the things I said wouldn't have happened either, Nader has always put the American People First, with the Corporations who Bribe and run this country second.

        Run down Nader and Obama with cheap insults if you want, its just more negativity I'm used to hearing from the haters.
      • 5 Years Ago
      The Corvair was supposed to be out of production after 1966 when the new Camaro debuted, but ironically, Nader's book caused GM to keep the Corvair in production through 1969 so it wouldn't appear that Nader was right.

      Nader didn't kill the Corvair, the Mustang did. The Corvair couldn't compete because it was costlier to build, and the horsepower wars were on.
        • 5 Years Ago
        Darn your facts!

        (shakes fist)
      • 5 Years Ago
      so much government that even Nader is worried... WOW! never thought that would happen...
        • 5 Years Ago
        Nader is asking Frank and Dodd for MORE government oversight?

        Who is afraid of government, and asks for more of it?

        As long as government is taking over corporate activity, Nader is probably happy, as Nader has been anti-business for a LONG, LONG time.
      • 5 Years Ago
      I seem to have a different take on Nader's letter from most other posters. I think his concern is that there is a group with NO accountability or experience in the auto industry making demands of GM and Chrysler. Nader want the Auto Task Force decisions to be reviewed by congress.
      I don't feel all that trusting of a bunch of political appointees calling the shots in a multi-billion dollar industry they may or may not have experience with.
      (sarcasm)That doesn't sound like a recipe for corruption at all....
      • 5 Years Ago
      So...the Wall Street bailout was a giant waste of taxpayer money, so his argument is "how could Congress possibly screw this up any worse?"

      Not exactly an inspiring argument in favor of more bridge loans. How about we learn from our mistakes and let broken companies die. Ford will pick up the pieces.
      • 5 Years Ago
      did anyone actually read his letter, guy makes a lot of good points. task force wants gm's new model to be close US plants and import cars from China and Mexico... so our tax dollars will go to closing our plants and allowing the Chinese to sell chevys and buicks here... umm, yeah, maybe there should be more transparency, maybe it should be thrown out in front of everyone.

      I'm not a big Fan of good ol' Nader, but after that letter, he scored a lot of points. seriously folks, read the letter, i learned a lot about the plans for GM, the auto task forces plans for GM i mean... they are scary, basically just selling the country out for a short term gain... how is that good for the tax payers funding it?

      • 5 Years Ago
      I'm probably the only Nader fan on Autoblog.
        • 5 Years Ago
        JakeB,

        That is a completely racist thing to say.

        If people disingenuously call honest dissent against Obama's POLICIES a racist act, as many have over the course of the last year or more...

        ...then claiming that minority skin color is the instrument that gets people elected is at least just as racist.
      • 5 Years Ago
      Why does this tool think anyone cares about his opinion?
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