Bill Manzi.com

Representative Henry Waxman today deposed longtime chairman John Dingell as the chairman of the House Energy and Commerce Committee. Dingell is one of the strongest supporters of the big three on the Hill, and has clashed with Waxman as well as the Speaker on numerous occasions. From the Washington Post:

On a 137-122 vote, Waxman dethroned Dingell from a post he has held as either chairman or ranking Democrat since 1981. He is the most prominent supporter of his home state’s auto industry and has feuded with junior committee members, including Waxman, over efforts to impose fuel efficiency standards on cars.

“Seniority is important, but it should not be a grant of property rights to be chairman for three decades or more,” Waxman told reporters after the vote.

The powerful committee, which has jurisdiction over health care, energy issues and telecommunications policy, will play a significant role in Obama’s agenda in the 111th Congress, a point that Waxman’s campaign drove home in the last two weeks. He argued that Dingell would be an impediment to all kind of legislation the new White House wants to push.

Dingell has fought CAFE standards, and had all sorts of battles with fellow party members over other issues as well. Last year Speaker Pelosi created a special committee of the House chaired by Ed Markey to deal with global warming issues. That led to a clash with Dingell on procedural grounds. As I mentioned in an earlier post on this subject the invisible hand of Speaker Pelosi was at work here, and maybe that hand was not as invisible as she thought.

Senior Democrats were stunned by the Waxman victory, which seemingly dealt a blow to the party’s long-held principle of seniority. “It’s just been buried,” Rep. Charlie Rangel (D-N.Y.), chairman of the Ways and Means Committee, said of seniority.

Despite House Speaker Nancy Pelosi’s public neutrality in the race, Rangel accused her of tacitly supporting Waxman because her closest allies in the House ran his campaign and she did not intervene to stop Waxman, a home-state colleague, from running a campaign that exposed ideological fissures among Democrats.

“I assume that not playing a role is playing a role,” Rangel said.

The Speaker named Dingell Chairman Emeritus, which I believe is what they name horses with broken legs.

Dingell, who recently had knee-replacement surgery and has been in a wheelchair, did not speak to reporters after losing the vote. Pelosi named him chairman emeritus, an undefined title. It is unclear what actual authority he will have.

It actually is pretty clear how much authority he will have, and it ain’t much! The Big Three are not having a good week.

Yesterday’s New York Times had an excellent op-ed piece by Mitt Romney on the issues facing the auto industry. Romney’s father, George Romney, was the CEO of American Motors and helped to bring back that struggling company in difficult times. Romney made some excellent points in the piece. Romney is a smart guy, and while there will be some disagreement on particulars, his thoughts on this subject are basically sound. A posting over at Blue Mass Group on the Romney op-ed was titled “Romney might be right. (AAAAGGGHHH!!! It burns!! It burns!!)” . Besides having a funny title the thread has some pretty interesting stuff and is worth a look.

Romney makes a good case for no bailout, with bankruptcy being used as a restructuring tool to make the U.S. automakers more competitive.

First, their huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

That extra burden is estimated to be more than $2,000 per car. Think what that means: Ford, for example, needs to cut $2,000 worth of features and quality out of its Taurus to compete with Toyota’s Avalon. Of course the Avalon feels like a better product — it has $2,000 more put into it. Considering this disadvantage, Detroit has done a remarkable job of designing and engineering its cars. But if this cost penalty persists, any bailout will only delay the inevitable.

Romney does not just take aim at the UAW, but calls for the ouster of management as well.

Second, management as is must go. New faces should be recruited from unrelated industries — from companies widely respected for excellence in marketing, innovation, creativity and labor relations.

The new management must work with labor leaders to see that the enmity between labor and management comes to an end. This division is a holdover from the early years of the last century, when unions brought workers job security and better wages and benefits. But as Walter Reuther, the former head of the United Automobile Workers, said to my father, “Getting more and more pay for less and less work is a dead-end street.”

You don’t have to look far for industries with unions that went down that road. Companies in the 21st century cannot perpetuate the destructive labor relations of the 20th. This will mean a new direction for the U.A.W., profit sharing or stock grants to all employees and a change in Big Three management culture.

The need for collaboration will mean accepting sanity in salaries and perks. At American Motors, my dad cut his pay and that of his executive team, he bought stock in the company, and he went out to factories to talk to workers directly. Get rid of the planes, the executive dining rooms — all the symbols that breed resentment among the hundreds of thousands who will also be sacrificing to keep the companies afloat.

Ah, the planes. The Big Three CEO’s were asked about their method of travel during yesterdays hearings, and it appears that all three flew in to Washington on corporate jets. One wise guy congressman asked if they had considered plane pooling and was met with silence. These guys still do not get it, and just do not appear to have what it takes to change. Two of the three declined to say they would reduce their salaries after a federal bailout. Romney is right. They need to go. And the executive perks need to go with them.

Romney, an astute business person, calls for pumping up R&D, not cutting it back, and wisely calls for a longer view of what constitutes business success. The all encompassing focus on quarterly results has been destructive.

Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. Invest in truly competitive products and innovative technologies — especially fuel-saving designs — that may not arrive for years. Starving research and development is like eating the seed corn.

And Republican Romney does not totally eschew government intervention. He calls for post bankruptcy credit to be extended, as well as government guarantees of warranties during bankruptcy. He also calls for government assistance through accelerated federal R&D in areas like fuel economy, alternative fuels and other areas.

It is not wrong to ask for government help, but the automakers should come up with a win-win proposition. I believe the federal government should invest substantially more in basic research — on new energy sources, fuel-economy technology, materials science and the like — that will ultimately benefit the automotive industry, along with many others. I believe Washington should raise energy research spending to $20 billion a year, from the $4 billion that is spent today. The research could be done at universities, at research labs and even through public-private collaboration. The federal government should also rectify the imbedded tax penalties that favor foreign carmakers.

Romney recognizes the importance of the American auto industry, and I believe that it is a vital cog in our economy. We must do what we can to save it, but simply allowing it some additional time as a jobs program makes no sense. For those that say that G.M. will come back and we should take that on faith show us the numbers. How does this work to insure that G.M. will not be back again in 7 or 8 months.

The American auto industry is vital to our national interest as an employer and as a hub for manufacturing. A managed bankruptcy may be the only path to the fundamental restructuring the industry needs. It would permit the companies to shed excess labor, pension and real estate costs. The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

In a managed bankruptcy, the federal government would propel newly competitive and viable automakers, rather than seal their fate with a bailout check.

We may all hate to admit it, but Romney is right. The medicine will be applied now, or it will applied in much larger doses later. Read the Romney op-ed piece here.

As an afterthought has Romney sold out to the eastern media elite by penning this piece for the ultra-liberal New York Times?

Arizona Governor Janet Napolitano has been chosen to be the Secretary of Homeland Security by Presdent elect Barack Obama. From the Washington Post:

Arizona Gov. Janet Napolitano (D), whose handling of immigration issues brought her accolades from fellow governors, is President-elect Barack Obama’s choice to serve as secretary of homeland security, Democratic sources said late Wednesday.

Napolitano, 50, was an early supporter of Obama and was the only elected official tapped to serve on his transition team. She was reelected in 2006 to a second term as governor of Arizona, the home state of Sen. John McCain, the Republican presidential nominee in the race against Obama. Napolitano previously served as U.S. attorney and state attorney general for Arizona; she was the first woman in both of those posts.

NBC News is reporting that Tom Daschle has been offered, and accepted, the job of Secretary of Health and Human Services.

NBC News confirms from Democratic sources that former Senate Majority Leader Tom Daschle, D-S.D., has accepted President-elect Barack Obama’s offer to be Secretary of Health and Human Services.

Daschle was an early Obama supporter, and I believe he should win Senate confirmation relatively easily.

http://www.msnbc.msn.com/id/22425001/vp/27805333#27805333

The Big Three automakers sent their CEO’s to Congress yesterday to lobby for immediate help but were not met with an overly receptive audience. Despite the feverish pace of lobbying it appears clear that no package will get through in this session, unless the Democrats are willing to amend prior legislation granting $25 billion for the big three to make advances in fuel efficiency. For now they do not appear to be willing to do so:

The White House adamantly opposes the idea, saying it would raid money needed to stabilize the financial system. President Bush has urged lawmakers to modify and accelerate the existing $25 billion loan program to build fuel-efficient vehicles, but the car companies, House Speaker Nancy Pelosi (D-Calif.) and other key Democrats are unwilling to divert the money from its original purpose.

Why the Democrats are not willing to go along with the President now, and refile the older legislation in a new session is a mystery to me.

G.M. CEO Rick Wagoner also threw cold water on the idea of a Chapter 11 bankruptcy that would provide government help by extending credit to the company as it reorganizes.

When Corker raised the prospect of a prearranged bankruptcy with the government offering to help one or more of the firms restructure under court supervision, Wagoner snapped back that the idea is “pure fantasy.”

A bankruptcy, he said, “would ripple across this economy like a tsunami we haven’t seen. It seems to me like a huge roll of the dice.”

U.A.W. President Ron Gettelfinger has said that the focus should not be on the U.A.W. contract, but on the economy. He has pointed to the many concessions given by the U.A.W. in the last contract as evidence that wage parity has been achieved with foreign automakers. But Gettelfinger is not living in reality if he believes that federal money is coming without a further restructuring of the labor costs of these companies. Today’s editorial in the Boston Globe is likely reflective of Congressional sentiment:

The UAW argues that its 2007 contract already contained major concessions, including a two-tier wage system under which new workers earn much less than veterans. In addition, workers at General Motors and Ford Motor Co. approved landmark deals last year requiring them to pay for a portion of their healthcare coverage; previously, the auto companies footed the bill.

But companies across the country are shedding workers and benefits, and no one is showing them much sympathy. There will be no taxpayer-funded federal rescue plan for those Americans who don’t work in industries considered too big to fail. If they are lucky enough to continue working, they have no recourse once employers decide to cut benefits. If they lose their jobs, they face the fear of long-term unemployment and an uncertain economic future.

The average American worker lacks the protections longtime UAW members still enjoy. For example, UAW contracts include a provision giving workers 95 percent of their wages while on layoff, along with other job-security provisions.

Concessions shouldn’t be a one-way street. As a condition of any bailout, auto executives should be prepared to reduce their ranks, accept management changes, and take cuts in salaries and bonuses, too.

If union and management can’t agree on some concessions in exchange for federal help, they risk the other b-word: bankruptcy. There would be no negotiating then, just a court-ordered restructuring of these failed auto giants. Labor contracts would be neutered in a bankruptcy filing. If the UAW wants to avoid that unpleasant scenario, it should soften its tone on concessions.

Get ready for a bankruptcy filing by G.M, unless the Democrats make a deal with President Bush on that existing $25 billion!

http://www.msnbc.msn.com/id/22425001/vp/27769912#27769912

The longest serving Republican Senator in history, and a revered icon in Alaska, Senator Ted Stevens, has lost his bid for re-election. Anchorage Mayor Mark Begich, a Democrat, was declared the winner after opening a lead on Stevens that could not be overcome with the ballots yet to be counted. Stevens was recently convicted of seven felony counts with regards to unreported gifts, and was likely to be expelled from the Senate in any case.

With the victory of Mayor Begich the Democrats will have a caucus that numbers 58, including two independents. With two races still open (in Georgia and Minnesota) the Democrats could conceivably end up with sixty senate seats, which has not happened since 1978.

Pete Williams of NBC is reporting that Barack Obama has offered the job of Attorney General to Eric Holder, a former Justice Department number two man under President Bill Clinton. From NBC:

President-elect Obama has offered Eric Holder the position of attorney general, and Holder has accepted it, according to sources involved in the process. The formal announcement has been held up while Obama transition team members ran the idea past key senators. And Obama wanted to announce members of his financial team first — Treasury Secretary and so on.

Holder was an acting A.G. when the Marc Rich pardon was issued by Clinton, and he took some heat for that.

His only potential hang-up for confirmation is the controversy over the pardon of Marc Rich in the closing hours of the Clinton administration. Holder approved the pardon as acting attorney general, after Reno left, without paying much attention to it, and it turned out to be a big embarrassment to Clinton.

So far, the Hill response to Holder has been positive, officials say.

The offer to Holder was made last week, officials say, and he accepted it, conditioned on a good reception from the Hill. So this is as close to a done deal as it can get before it’s announced.

So much for all the talk about Massachusetts Governor Deval Patrick being named Attorney General. Holder has been through three separate Senate confirmations without ever having received a no vote. Quite an impressive feat.

Senator Joseph Lieberman emerged from the Democratic caucus intact today, managing to hold onto his chairmanship of the Homeland Security Committee. From MSNBC:

Sen. Joe Lieberman will keep his chairmanship of the Senate Homeland Security Committee despite hard feelings over his support for GOP nominee John McCain during the presidential campaign.

The Connecticut independent will lose a minor panel post as punishment for criticizing Obama this fall.

Lieberman’s colleagues in the Democratic caucus voted 42-13 Tuesday to approve a resolution condemning statements made by Lieberman during the campaign but allowing him to keep the Homeland Security Committee gavel. He will leave the Environment and Public Works panel, however.

The deal was apparently brokered by Chris Dodd and Ken Salazar, as we had mentioned in an earlier post. Not everyone was in a forgiving mood however.

On the other side were senators who feel that one requirement to be installed in a leadership position is party loyalty.

Some, like Iowan Tom Harkin, still harbor hard feelings for statements Lieberman made during the campaign. Harkin took particular offense when Lieberman said a vote against funding the war in Iraq without a deadline for a troop withdrawal meant Obama had voted to cut off funding for troops in harm’s way.

“That’s outrageous what he said,” Harkin said.

Joe lives on in the Democratic caucus, and I am sure that some people will be outraged. I find it hard not to be outraged myself, but that is politics for you!

http://www.msnbc.msn.com/id/22425001/vp/27787227#27787227