GM's earnings. . .
source: WSJ Markets Data Service
DETROIT — Calling 2005 "one of the most difficult years" in its history, General Motors Corp. reported a fourth-quarter loss of $4.78 billion, or $8.45 a share, saying the results are preliminary, pending the outcome of a previously disclosed internal accounting review of how it booked supplier credits in the past.
The massive losses were led by a poor performance in GM's flagship North American automotive operations and restructuring charges related to restructuring and other charges.
The past year was "was a year in which two significant fundamental weaknesses in our North American operations were fully exposed – our huge legacy cost burden and our inability to adjust structural costs in line with falling revenue," said Rick Wagoner, GM's chairman and CEO.
The company's $4.8 billion loss in the fourth quarter compared with a loss of $99 million, or 18 cents a share, in 2004's final quarter. Excluding "special" items related to plant closings and a $2.3 billion guarantee to United Auto Worker members employed by Delphi Corp., GM said its quarterly losses were $1.2 billion, or $2.09 a share in the fourth quarter, which it compared with adjusted earnings of $726 million, or $1.28 a share, a year earlier.
GM said it could revise the earnings report sometime prior to its filing of its annual 10-K form with the Securities and Exchange Commission. In that filing, GM is expected to report the results of the Delphi-related internal accounting review, which could have an impact on GM's previously reported numbers. GM's review is probing the booking and timing of supplier credits, and the company has said it will adjust its numbers in the coming weeks if necessary.
All told, GM's fourth-quarter special items totaled $3.6 billion after-tax, or $6.36 a diluted share, including an after-tax restructuring charge of $1.3 billion in North America and the preliminary after-tax Delphi-UAW guarantees.
Delphi, which is under bankruptcy-court protection, was a GM subsidiary before the car maker sold it in a public offering. As part of the sale, GM made certain pension and health-care guarantees to thousands of unionized workers who transferred to the Delphi payroll.
GM's fourth-quarter losses brought its total 2005 loss to $8.6 billion, or $15.13 a share, compared with net income of $2.8 billion, or $4.92 a share, for 2004.
Auto-Making Losses
GM's losses continued to be driven by weakness in its automotive business, mainly in North America, which recorded an adjusted loss of $1.5 billion in the quarter, compared with $268 million a year earlier. Globally, GM's automotive operations reported an adjusted loss of $1.5 billion during the quarter, compared with adjusted earnings of $268 million a year ago.
Overall, GM's automotive operations posted adjusted losses of $5.3 billion in 2005; they had adjusted earnings of $1.2 billion in 2004. The losses were partially offset by improvements in GM's results in Europe and Latin America.
GM said its quarterly losses in North America were driven by lower production of full-sized sport utility vehicles, increased health care costs, and higher marketing and advertising spending. "GM's top priority is to restore our North American operations to profitability and positive cash flow as quickly as possible," Mr. Wagoner said in a prepared statement. GM said its global capital spending was about $1 billion in 2005, which included investment in its new line of SUVs and trucks and crossover vehicles.
By contrast, General Motors Acceptance Corp., GM's most profitable subsidiary, which sells mortgages and insurance, boosted GM's results with fourth-quarter gains of $614 million, compared to $683 million a year earlier. The quarterly boost brought GMAC's 2005 contribution to $2.8 billion, down from $2.9 billion a year ago. GMAC's strong performance came despite the strong headwinds posed to by GM's junk credit ratings.
GM also cut its long-running losses in Europe nearly in half in 2005 and reported an adjusted fourth quarter loss of $159 million, an improvement from a loss of $345 million a year ago.
In its Asia-Pacific region, GM reported adjusted earnings of $112 million, down from $117 million a year ago, while in Latin America, GM reported quarterly adjusted earnings of $20 million, compared to $47 million a year ago.
Shares of GM slid in early morning trading Thursday, dropping 4.6% to $22.75 on the New York Stock Exchange. The stock had rallied earlier in the week in the wake of Ford Motor Co.'s better-than-expected earnings report.
Problems at GM, Ford
The world's largest auto maker, along with No. 2 U.S. car maker Ford, has been struggling with declining U.S. sales and rising health-care and materials costs.
Mr. Wagoner said earlier this month that GM aims to reduce costs by about $11 billion by the end of 2010 in a sweeping plan that inevitably will lead to more job cuts beyond the 30,000 GM has promised by 2008. Thursday, GM also reiterated that it continues "to explore the possible sale of a controlling interest" in GMAC.
President Bush, in an interview Wednesday, said GM and Ford should develop "a product that's relevant" rather than look to Washington for help with their heavy pension obligations, and hinted he would take a dim view of a government bailout of the struggling auto makers. Asked if he had spoken to GM's Mr. Wagoner or Ford Chairman and CEO William Clay Ford Jr., Mr. Bush replied: "Not about their balance sheets." He added: "And I haven't been asked by any automobile manufacturer about a bailout." (See transcript below.)
In trying to get out of its rut, GM also is cutting sticker prices for many of its models, as it tries to wean customers off of a steady diet of incentives. Last summer, amid slow sales and heavy inventories on many models, GM launched a clearance sale, offering vehicles at employee-discount pricing. Although the deal came with slimmer margins, it boosted sales significantly. But GM's sales were sluggish for several months after the promotion, even as Japanese rivals made steady inroads.
In recent months, GM's stock price slumped as investors grew alarmed at the company's inability to turn a profit on auto making. In December, Standard & Poor's downgraded GM's corporate credit rating two notches to a B, with a negative outlook, from a previous rating of double-B-minus, saying GM's prospects for a bankruptcy filing had increased.
The Detroit-based company, however, recently received an endorsement of sorts. Investor Kirk Kerkorian boosted his stake in GM back to 9.9%, paying about $263 million for 12 million shares of the auto maker — essentially reversing a December sale that had lowered his stake to 7.8%.
| Ford's earnings. . .
GM's earnings. . .
source: WSJ Markets Data Service |
For the past several months, both Ford Motor Co. and General Motors Corp. have faced pressure from investors and their competitors to streamline and strengthen operations. High labor costs have eaten away at earnings, and increasingly fierce competition from overseas has reduced their shares of the U.S. market for automobiles.
Investors have been calling for change, and the companies are responding. Here are details of the companies' restructuring plans.
FORD
Ford's "Way Forward" plan was unveiled Monday after the company announced stronger-than-expected fourth-quarter earnings. Among other changes, Ford plans to:
The company is also going to put an emphasis on lowering purchasing costs and plans to lower sticker prices while at the same time reducing and/or capping rebates on new products. Ford's Mercury brand was on the table for elimination, but survived because of its ability to draw in female buyers, said people who worked on the plan.
In late December, United Auto Workers employees ratified health-care concessions aimed at cutting the company's expenses. Under the deal, retirees will pay higher premiums and co-payments while employees will forgo certain pay raises and pay more for prescription drugs. The changes will remove about $650 million from its estimated annual health-care bill of $3.5 billion; the company expects its long-term liability will be reduced by $5 billion.
GENERAL MOTORS
In November, GM unveiled a restructuring plan that will include:
In October, GM announced a deal with the United Auto Workers to secure the contributions of its hourly workers for the company's retiree health-care plan. The deal will reduce GM's liabilities for unionized retirees by about $15 billion, or about 25%. Annualized cash savings are estimated at about $1 billion a year. The deal received preliminary court approval in December.
Since announcing the restructuring in November, GM has shuffled its management, naming the head of its European operations, Frederick "Fritz" Henderson, to succeed retiring Vice Chairman and Chief Financial Officer John Devine. In early January, it unveiled a plan to slash base sticker prices for nearly 80% of its U.S. models, in exchange for sharp cutbacks in its incentive programs. Some incentives remain, particularly on older models and large SUVs.
DETROIT - General Motors Corp. posted a fourth-quarter net loss of $4.8 billion on Thursday, much worse than Wall Street had expected, amid high costs, shrinking market share and sluggish sales of sport utility vehicles.
It was the fifth straight quarterly loss for the world's largest automaker and brought its losses for all of 2005 to $8.6 billion.
"The numbers are much worse than I thought they would be, especially given how Ford beat the estimates earlier this week," Argus Research analyst Kevin Tynan said.
On Monday, Ford Motor Co. reported a surprising 19 percent rise in fourth-quarter earnings.
GM shares dropped 80 cents, or 3.35 percent, to $23.05 in early trading on the New York Stock Exchange. The company's 8.375 percent bonds due in 2033 were quoted at 72.5 cents on the dollar, down 0.5 cent, according to MarketAxess.
The earnings report came a day after news that billionaire investor Kirk Kerkorian had raised his stake in GM to 9.9 percent. Kerkorian has called for sweeping changes at the auto giant, and a key adviser has suggested he might be prepared to organize a fight for control of the GM board.
GM's fourth-quarter loss amounted to $8.45 a share, compared with a year-earlier loss of $99 million, or 18 cents a share.
Excluding one-time items, the company posted a loss of $1.2 billion, or $2.09 a share. On that basis, analysts' average forecast was a loss of 12 cents a share, according to Reuters Estimates.
One-time items reduced earnings by $3.6 billion, or $6.36 a share. They included a restructuring charge of $1.3 billion at GM's North American operations, and a preliminary after-tax charge of $2.3 billion related to a benefit guarantee with the United Auto Workers union and bankrupt auto parts supplier Delphi Corp..
Analysts were expecting charges after GM in October announced plans to slash 30,000 jobs and shutter 12 facilities, but no one knew how large the charges would be.
Fourth-quarter revenue fell to $51.2 billion from $51.4 billion a year earlier.
"It was a year in which two significant fundamental weaknesses in our North American operations were fully exposed -- our huge legacy cost burden and our inability to adjust structural costs in line with falling revenue," Chief Executive Rick Wagoner said in a statement.
GM earlier this month said it expects to cut North American structural costs by $6 billion by the end of 2006.
GM said its automotive operations lost $1.5 billion in the fourth quarter, driven by large losses in North America, where it has been losing market share to foreign rivals such as Toyota Motor Corp..
General Motors Acceptance Corp., the company's finance unit, posted net income of $614 million, down from $683 million a year earlier.
The automaker plans to sell a controlling stake in its finance arm in order to restore the unit's investment-grade ratings. Both GM and GMAC have said talks with potential partners are "ongoing."
source: http://www.nytimes.com/reuters/news/news-autos-gm-earns.html?_r=1&pagewanted=print 26jan2006
President Bush met Tuesday with The Wall Street Journal's Gerald Seib, Christopher Cooper and John McKinnon for a wide-ranging talk ahead of his yearly State of the Union address. Below is an edited transcript of the discussion.
The Wall Street Journal: Thanks for taking the time for us. We wanted to think forward to the State of the Union a little bit, next week. Obviously, health care is something that has moved back to the top of the agenda. You've got employers and employees both equally concerned about cost and availability. What's the approach going to be this year, philosophically and specifically?
President Bush: The government must work to reduce costs through the spread of information technology, which many in the health field say will help reduce the rising costs substantially; litigation reform to prevent these frivolous lawsuits from running up the cost of medicine, either through the practice of defensive medicine and/or premium increases, and actually drive good docs out of business. I'm particularly concerned about OB/GYNs; we have an OB/GYN crisis in states because of these lawsuits. The patient-doctor relationship is a crucial relationship in helping control the costs of medicine. The more transparent pricing is and the more opportunities patients have to make decisions in the health-care field, the more likely it is costs will not increase as dramatically as they have in the past.
I believe in the expansion of HSAs [health savings accounts]. I will talk about my philosophy for health care in the State of the Union. I will specifically address issues that I want the Congress to take up over the course of this month, including how to expand HSAs to make them achieve an objective, which is to have a patient-doctor relationship that will have market forces within the decision-making process and the pricing of medicine; as well as have a system that's portable for our workers, to recognize that we are a society which has significant job turnover, and therefore one of the uncertainties in a society in which there is job turnover is whether or not health care will go from one job to the next.
As well, HSAs, in my judgment, as well as other innovative programs, like association health plans, will enable the small-business sector of the economy, in which there's a lot of working uninsured, to be able to more likely afford health care. That's what I'm going to be talking about.
WSJ: How do you turn that into a bipartisan movement?
Mr. Bush: The question going into the '06 year is how do we take health care or entitlement reform, or all these issues, into something that the country really wants — which is a bipartisan look at issues, as opposed to what many interpret to be needless politics, so whether it be in health care or in a variety of issues we'll be discussing. And that's the challenge of the '06 year.
One big issue is competitiveness, of which health care is an important component. If our health-care system is such that small businesses, for example, can't afford to stay in business, it's going to obviously hurt our people, but it's also going to make our country less competitive. The war on terror is a big issue. And I will continue to talk about a bipartisan approach to beating the terrorists. So whether it be in health care or these other issues, it's, no question, a challenge.
WSJ: Is competitiveness going to become more of a theme for you in this year?
Mr. Bush: Competitiveness has always been a theme for me, and I'm going to continue to make it one. Remember, in the campaign, I used to say, "How do you deal with jobs going overseas? Make America the best place in the world to do business." That is a competitiveness theme that basically says I recognize that we've got to compete. And we have a global economy. Some wish there wasn't a global economy, but there is a global economy. And we've got to have our young trained for the jobs of the 21st century or else [the jobs are] going to go somewhere else. That's what happens in a global economy. And there's been some interesting — there is an interesting debate in America about, well, how do you react to a global economy? There are some who say, let's protect ourselves. And as you know, I believe in opening markets and enforcing trade law, which is the opposite of "let's protect ourselves." It's "let's compete, and by the way, let's make sure we have an environment within America that enables us to be competitive."
WSJ: Now speaking of competitive, we have some problems. GM and Ford are experiencing some of those problems themselves these days. And to that end, I wonder if you could talk about your thoughts about what their situation is and what the government might or might not be able to do for them.
Mr. Bush: Well, my first reaction is for the worker. I see people who have invested their lives in a company that are now not going to have a job. My hope, of course, is that some of these workers are workers that will be taken care of in their retirement — if they're close to retirement, then the company will help them to retire.
There will be workers that will be relatively young who are going to need to be given help in gaining skills in which they'll be able to fill new jobs. That's going to be difficult for people. It will be a very unsettling time. I believe the economy is robust, and as I said, there's changing jobs. But it's really important, as this economy grows, a dynamic economy grows, that there's a match with — you know, worker with skill sets, doesn't make — help them find those jobs.
So this is going to be a very troubling time for workers and their families, and I recognize that. And so one role the government can help is through job training and the company has an obligation to help transition — help these workers transition, as well.
In terms of competitiveness, we live in a world in which a Ford or GM has got to compete with other manufacturers that are able to deal with costs in a different way than they are, as well as coming up with product that is relevant.
I was pleased to see some talk about product lines being — you know, focusing on flex fuel, for example. The idea of a car being able to use gasoline, hydrocarbon-base fuel and/or fuel, but coming out of — whether it be corn or waste. And one of the things I'm going to talk about in the State of the Union is the need for this country to continue to promote technology in order for us to diversify away from hydrocarbon.
WSJ: The Brazil example.
Mr. Bush: Well, and I was very impressed down there about the fact that, first of all, a lot of the fuel being manufactured in Brazil is from sugar, and that GM-manufactured products are flex fuel products. There's other technologies we can use, as well. And so as these automobile manufacturers compete for market share and use technology to try to get consumers to buy their product, they also will be helping America become less dependent on foreign sources of oil. So this is an interesting moment in the evolution of the automobile, and for these car companies trying to stay competitive.
WSJ: But the credit markets think there's a realistic chance that GM could go bankrupt. Can you imagine allowing an American corporate icon like General Motors or Ford to go bankrupt?
Mr. Bush: I have been very reluctant — I'm mindful of the past where at one point in time, a predecessor of mine was faced with that same dilemma — an American automobile company not going bankrupt. I would hope I wouldn't be asked to make that decision.
WSJ: But if you are, can you let it happen?
Mr. Bush: Well, let's presume — why don't we think about the best, as opposed to worst.
WSJ: OK, all right — well, let's — OK, that's fine. But in that context, then, let's think more present day. Have you talked to Rick Wagner at GM or Bill Ford? Have they talked to you about their prospects? Have they asked you for anything?
Mr. Bush: No, they have not asked me for anything.
WSJ: And are you inclined to do anything proactively or to let this play out?
Mr. Bush: I think it's very important for the market to function. And I haven't been asked by any automobile manufacturer for a bailout, if that's what you're asking.
WSJ: Have you spoken to them?
Mr. Bush: Not about their balance sheet. We are in touch with them about how realistic is it, for example, for the hybrid automobile to become more widespread in the American society, or whether or not the flex fuel vision I just outlined is — there are opinions of the flex fuel vision. But, no, there has been no direct, as far as I know — nobody has talked to me, they haven't talked to me specifically.
WSJ: Well, can the government, should the government do something specifically to help companies like GM, Ford, or the airlines, as far as that, and help with their pension funds and their health care funds?
Mr. Bush: My attitude on pension funds is this: If you make a promise, you must fulfill the promise for your pension funds. You have an obligation in corporate America when you negotiate your contract, to fulfill the contract and make good on your pension promises, whether it be the companies you just outlined or any other company in America.
And as you know, we're having a pension reform discussion. And I am very firm on seeing to it that this government holds people to account. Otherwise, the fallback, of course, is that we make these promises but don't worry, the government will pay it. That's not how the market works. And that is not corporate responsibility as I see it.
The Wall Street Journal: You opened the door to energy, so can we talk energy for a minute? You've talked about flexible fuel, you walked through it.
Mr. Bush: Yes.
WSJ: Are you going to propose something that specifically makes flexible fuel more attractive, an initiative of some kind that makes that happen?
Mr. Bush: We're spending over a billion now on technology, and I'm going to remind the American people that the way to achieve a national objective, which is less dependency on foreign oil, and improve the quality of our environment, is for the government to encourage research and development and new technologies that have got marketplace applications.
And there's a variety of things taking place, by the way, in order for us to meet those objectives. Clean coal technology is one. Battery technologies, in which the federal government is providing a role, which is a research and development role, in terms of encouraging the market, the private sector, to develop these technologies that will change how we live and achieve these objectives. And the objective has got to be diversify away from the hydrocarbons, and at the same time, protect our environment.
WSJ: What I'm trying to get at is, you could do things on the tax side to make it more attractive to either produce those or to buy those hybrid —
Mr. Bush: Well, we've done that already, in the energy bill. As you know, we've got a good-sized tax credit there. There are ways to make it more attractive, to continue to spur research and development to develop the products which become market applicable.
WSJ: So your focus is really on government-sponsored technology.
Mr. Bush: I would call it research. Government-sponsored technology is kind of an interesting way to put it. I would say, government research, applied science that will help us achieve an important objective.
WSJ: If things go well on the 2nd at the IAEA [International Atomic Energy Agency], you'll get the Iranian question to the Security Council. It looks like that's going to happen. What do you want the Security Council to do with it once it gets it?
Mr. Bush: The objective is to continue to work with many nations around the world to convince Iran to get rid of its nuclear weapons ambitions. That's the objective. Another objective is to, as we talk to the Iranians about this objective, is to remind them, as well, that our objection to the Iranian government — our objections with Iran are with their form of government, not with the Iranian people.
The United Nations is a part of a process in which the world can speak to the Iranian people and to the Iranian government. We are in the process of working with our friends and allies as to how to devise a set of resolutions which will allow us to speak with a unified voice.
I have proposed, and have agreed with the Russians who proposed a civilian nuclear program — the development of a civilian nuclear program within Iran. And the materials for this program, however, will be enriched in a third country, in this case, Russia, delivered by — with IAEA safeguard, by the Russians to the Iranians to be used, the waste of which will be picked up and disposed in Russia. That's where we are on the issue.
All matters should be — it's important for us to exhaust all diplomacy, and so you're watching a diplomatic effort evolve in which we are working — "we," there's a lot of us working to present a unified front to the Iranians. And, clearly, there's a set of different options available through the Security Council and now we're working with our friends to review those options.
WSJ: Why not take the lead? Why doesn't the U.S. take the lead?
Mr. Bush: Well, there's several ways to lead. One is to hold the press conferences. Another is to work with friends and allies, constantly reminding them of the issue. Another is to recognize the best way to achieve objectives and let others be the negotiator. So we're constantly — on every issue we're constantly analyzing how best to be effective. And we are leading. But leadership takes different forms, and in this case — you know, I speak to Tony Blair all the time. I'm constantly talking about the issue. But you can have more than one leader on an issue, is my point to you. The Brits and the Germans and the French are leading, as well. In other words, this is a multilateral effort.
WSJ: You had Sens. Lieberman and Roberts on TV over the weekend, both saying that the military option should not be taken off the table.
Mr. Bush: That's what I said in Germany.
WSJ: So you're there with them?
Mr. Bush: Yes.
WSJ: Do you have a timetable in mind for working out some resolution on the Russian proposal?
Mr. Bush: Well, that's — you mean do I — whether or not the —
WSJ: Do want to answer on that first?
Mr. Bush: From the Iranians?
WSJ: Yes.
Mr. Bush: My view of diplomacy is that it's a constant — it's in constant motion, and we're constantly strategizing and dealing with the latest nuance. And Jerry mentioned there's a time certain in which certain things are going to happen, but you never want to exclude the possibility of a decision being made later on. And so we're constantly evaluating the position, aiming for a common objective, which is to convince the Iranians to give up their nuclear weapons — and to speak to the people in Iran about the blessings of liberty.
WSJ: Does this Iranian president — this current Iranian government strike you as one that the world can deal with?
Mr. Bush: I am very concerned about a president of a great country like Iran declaring his intent, or his interest in the destruction of one of our closest allies. And that should be of concern to people who care for the peace around the world.
WSJ: Do you want to talk about the spread of democracy elsewhere in the region?
Mr. Bush: Sure.
WSJ: Or in the rest of the world.
Mr. Bush: Absolutely.
WSJ: How do you feel the fight is going?
Mr. Bush: Again, the stated objective, the goal is to end tyranny in the 21st century. The reason why is because we have learned here in the early parts of the 21st century that the combination of a terrorist group and a non-transparent tyrannical state can be very dangerous for the world. And, therefore, the short-term objective in the war on terror is to bring our enemies to justice. A long-term objective is to replace the ideology of hatred with one that has proven itself to work to yield the peace.
And first, there's been several tests of the capacity of people to grab a hold of democracy — the desire for people to grab a hold of democracy. One of my objectives early in my presidency was to try to convince folks that everybody desires to be free. It's called the natural rights of man. That's how we were founded. And if you believe that, if you believe that people desire to be free, then one has to be optimistic that liberty can spread if just given the — if people have a chance.
Afghanistan is a fledgling democracy. When we had our first interview in '99 or 2000, I doubt you and I had in our mind that one of these days we'd be sitting here in the Oval Office — for a variety of reasons — (laughter) —
WSJ: I never doubted it. (Laughter.)
Mr. Bush: Yes. But that we'd be talking about what institutions are necessary and what does it require to see to it that this fledgling democracy succeeds. We're watching the development of a new democracy in Iraq, and it's been difficult work because those who subscribe to an ideology, the ideology that we face, the ideology of the enemy, understand that advance of democracy will be a blow to them.
But you've got a new democracy, a new constitution in Iraq. There are democracy movements in Oman, in Jordan, in Morocco. They all take different forms and different shapes, and one of my concerns, of course, is that people in the Middle East — you know, here comes the Americans imposing their democracy on us. No; here come the Americans saying, you deserve to be free and you develop your society, your free society in a way that reflects your customs and habits.
Lebanon is an example of where the democracy movement has an opportunity to gain a foothold. And it is a difficult part of the world today because Syria refuses to relent. And the United Nations spoke on Syria, its involvement in Lebanon, and it didn't say, partially withdraw from Lebanon; it said, get out; your influence is destabilizing a democracy. And that resolution has given us a way to continue to rally folks who understand the potency of the liberty movement.
And it's hard work. I mean it's — we still have got a lot of work to do with Syria, obviously. But let me finish. Today the Palestinians are voting. In my judgment, the only way for our friend, Israel, and our friends in Palestine to live a peaceful life together is through democracy. I see no other alternative. And that's a decision that Ariel Sharon made. He made a bold decision. It was a decision that basically said the state of Israel must have a partner in peace based upon democracy. And the question that we're now going to — that the world must watch carefully is: Can the Palestinians, do they have the courage necessary to develop the institutions of a peaceful country, based on democracy, and will they reject armed political parties?
You can't be a democracy in peace with the neighbors so long as you've got political parties that are able to arm themselves to achieve their objectives. So to answer your question —
WSJ: Would the inclusion —
Mr. Bush: No, no, no. He asked me a question, I want to answer it. Liberty is moving in a part of the world where the observers would have said, this didn't seem possible five years ago. And it's not going to be easy work. It's not going to be easy, because there are people who resist it. People don't like the idea of — there will be all kinds of excuses.
WSJ: It's inconvenient.
Mr. Bush: True — for some. Difficult. There are some who say, well, if you're not a certain type of person, you can't self-govern. There are some who say we shouldn't push liberty with them because it might unsettle things, and therefore, the price of oil may go up. And my attitude is, is that America must have faith in our values, be idealistic about our vision, and practical about what's possible. But it's changing. It's changing. And it's going to be one of the really interesting stories of the early part of the 21st century if this country has the willingness to think about what's possible.
And I tell people — I'm sorry, but this is an important subject to me.
WSJ: I know.
Mr. Bush: And I'm sure you've heard this until you're sick of it, but there are lessons to be learned for an up-and-coming — for our generation and an up-and-coming generation about what took place after World War II. And you've heard the Koizumi discussion a lot, but I believe it's going to be repeated. And repeated.
WSJ: With Hamas?
Mr. Bush: Well, that's — Hamas must, one, reject and get rid of their platform that says the destruction of Israel. You can't be a peaceful democratic political party, yet part of your platform is to destroy your neighbor.
WSJ: Well, but does that complicate things? I mean, they're almost certain to win —
Mr. Bush: Yes, it complicates things. Absolutely. A political party that says I'm going to destroy my neighbor complicates things. And we'll see how the elections go. You're prejudging the elections.
WSJ: Well, I know.
Mr. Bush: Well, you shouldn't do that.
WSJ: Although, it's pretty conventional —
Mr. Bush: Well, I don't know what — who knows what the government is going to look like. My only point is that you can't have members of — a political party, in order to be viable, is one that professes peace, in my judgment, in order that it will keep the peace. And so you're getting a sense of how I'm going to deal with Hamas if they end up in positions of responsibility. And the answer is not until you renounce your desire to destroy Israel will we deal with you.
WSJ: I've got to ask you one last question. You're going up to the NSA [National Security Agency] today.
Mr. Bush: Yes. I am going out there because I want to tell those folks out there they're doing a service to the United States of America.
WSJ: Why, when you did — why when you did the wiretaps —
Mr. Bush: When I did the terror surveillance?
WSJ: OK. Why not just — why didn't you go back to the FISA [Foreign Intelligence Surveillance Act] court and get approval, because they surely would have given you approval even after the fact?
Mr. Bush: It's a different — the FISA law was written in 1978, and we require a different response to an enemy. And what I said — here, let me just give you my management style. I talked to people like General Hayden. I said: Can we do a better of job of protecting the American people within the Constitution and guaranteeing civil rights? Those were the parameters, because I want to make sure what I do, I've got the legal authority to do. So you design the program and look at all options. And this is the program they brought back to me. I'm not going to describe it to you, nor should anybody else, because all that does is tell the enemy how to adjust.
Now if the people don't believe there's an enemy there, fine. But there is an enemy. Their leader announced just the other day that [they're] going to attack. And so to answer your question, we had the legal scholars, we had our operators all look at the best way to be able to deal with a 21st century problem — and that is phone calls from outside the country to inside the country — not within the country; it's important for people — I think some are beginning — I thought initially because this was within the country — a known al Qaeda, or suspected al Qaeda calling in requires instant reaction. And so with FISA being used, the '78 law is relevant for some activities to protect the American people. These people came up with a different plan. And I'm sorry we're talking about it.
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