Senator Bob Corker, the Tennessee Republican who shaped the government’s demands of automakers in exchange for $82 billion of taxpayer money, said he feels “vindicated” by General Motors Co.’s initial public offering.
“I know I’m not very popular in Michigan,” Corker said yesterday in a telephone interview. “But our involvement in this transaction in the beginning refocused Washington in such a way that demands were made for the company to do the things necessary for success.”
The Bush and Obama administrations used Corker’s requirements for GM and Chrysler Group LLC bondholders to take losses and the United Auto Workers union to agree to lower wages and changes in health benefits as among the prerequisites for the U.S. funding their bankruptcies.
The U.S. Treasury Department sold almost half of its stake in Detroit-based GM this week for $33 a share, about $10 less than it needs to break even on its $49.5 billion investment in the largest U.S. automaker. The remaining shares will need to sell for about $20 higher to make up the difference.
“If you’re a taxpayer in this country, you’ve got to be very happy,” Corker, 58, said yesterday. “It’s my hope that we’ll get most if not all of our money back over time.”
Corker said he was “astounded” in November 2008 by GM Chief Executive Officer Rick Wagoner’s testimony to the Senate Banking Committee. Corker was convinced the automaker couldn’t be viable without bankruptcy and would keep returning for more aid, he said.
“I got involved when I realized that a deal was going to be done regardless,” he said. “Once I realized taxpayer money was going into these companies one way or another, that’s when I dug down and tried to figure out, if this is going to happen, let’s make sure we protect taxpayers. We’ve done that.”
After a federal rescue plan for the automakers failed in December 2008, President George W. Bush and Treasury Secretary Henry Paulson each made separate calls to Corker the morning they allowed GM and Chrysler to access loans through the Troubled Asset Relief Program, he said.
“They said, ‘We know you’re not going to like this, Corker, but we did put your criteria into the loan documents,’” Corker said.
Steven Rattner, the former head of the U.S. Automotive Task Force, deserves credit for making the “Corker Criteria” even stricter by requiring the automakers to make further reductions to their debt, and convincing the UAW to accept more of its health-care obligations from GM in stock, Corker said.
Before entering bankruptcy on June 1, 2009, GM had $54.4 billion in debt and owed an additional $20 billion to a retiree health-care trust managed by the United Auto Workers. GM had $88 billion in losses from the end of 2004 until going into bankruptcy.
GM now owes $15.6 billion in debt and preferred stock and $9.4 billion in underfunded retiree obligations. The company has made $4.77 billion in the first three quarters of this year. The old General Motors Corp. didn’t make that much in the first nine months of a year since 1999, when it earned $5.75 billion.
Rattner paid $6.2 million yesterday and accepted a two-year ban from associating with broker-dealers or investment advisers to resolve a Securities and Exchange Commission probe of kickbacks in connection with the New York state pension fund.
Corker said while he is pleased by the outcome of the government’s assisting GM, the rescue created a moral hazard.
“The actions that were taken hopefully will not lead companies to do more of this in the future just because this has been successful,” he said.
To contact the editor responsible for this story: Jamie Butters at email@example.com.