Democrats roll out auto rescue plan
Hoping to prevent another blow to the economy, Democratic congressional leaders unveiled a plan Monday for propping up the U.S. auto industry that closely tracks President Bush’s position -- about $15 billion in emergency loans if Detroit accepts a federal monitor to oversee operations and restructuring.
Supporters were cautiously optimistic that the plan would attract enough GOP backing to win congressional approval by the end of this week.
Under the proposal, the monitor’s authority would stop short of the near-complete operational control some critics wanted the new “car czar” to have. But the official, to be appointed by the president, would negotiate far-reaching plans for restructuring General Motors Corp. and Chrysler by March 31. Ford Motor Co., which is in better financial condition, apparently would not be part of the initial outlay.
If the restructuring plans, intended to assure the companies’ longer-term financial viability, are approved by the monitor, billions more in aid could be disbursed; if not, the companies would be ineligible for more money and would have to pay back the government loans they received.
The monitor would also have veto power over any transactions that exceed $25 million or that would substantially change the companies’ financial condition while the government loans are outstanding. And Washington would receive ownership stakes in the companies in exchange for the loans.
The bill also would prohibit any automaker receiving government money from continuing to pursue lawsuits against California and other states to stop tough new greenhouse gas emissions standards for vehicles.
The plan, which grew out of three days of negotiations among Democratic leaders in Congress and Bush administration officials, is being reviewed by the White House, which withheld immediate support Monday night. But the specifics appear to match most of the terms Bush has been insisting on since the carmakers launched their appeal for help last month.
White House spokeswoman Dana Perino said Monday morning that Bush wanted a presidentially appointed “financial viability advisor” to negotiate with the automakers and others, such as the United Auto Workers union, about their turnaround plans. Such an advisor should have the power to review restructuring plans and release longer-term funding if the person approved them, administration officials said. Perino also said an agreement with Congress was likely.
One element the White House had called for that was not in the Democrats’ bill was directing the monitor to submit a plan for putting the companies into bankruptcy restructuring and requiring them to repay the short-term funding if the monitor did not approve the restructuring plans -- a feature that would give that person additional leverage.
House Speaker Nancy Pelosi (D-San Francisco) said that “come March 31, it is our hope that there will be a viable automotive industry in our country, with transparency and accountability to the taxpayer. We think that it is possible.”
“But if they don’t meet the conditions of restructuring and the rest,” she added, “there’s not going to be an endless flow of money to this industry to continue, left to their own devices, the practices they have been engaged in.”
Pelosi and House Financial Services Committee Chairman Barney Frank (D-Mass.) said the legislation would force the automakers to become more financially viable without risking too much taxpayer money. Pelosi agreed Friday to the White House demand that money for the automakers come from an existing $25-billion fund to retool their factories to produce more fuel-efficient cars. But Pelosi said she wanted the money put back into the fund quickly.
Ford, which does not need money immediately, said Monday that it would not seek a short-term loan. It had asked for a $9-billion government line of credit it could tap in case the recession worsened or one of its competitors failed, which could threaten Ford because of numerous shared suppliers and dealers.
It was unclear whether Ford would participate in the monitored restructuring to get access to long-term funding.
GM said it supported the legislation.
“As part of our plan, we will abide by the conditions proposed in the bill and will continue our restructuring with great urgency,” GM said in a statement. “Millions of jobs, America’s manufacturing base and future competitiveness hang in the balance, and we urge quick passage of this bill.”
Chrysler said it was pleased with the progress on legislation and looked forward to working with Washington to complete its restructuring “in an orderly fashion.”
The bill pushes the hard decisions about the future of Detroit’s Big Three into early next year and the administration of President-elect Barack Obama. It requires the automakers, along with workers, bondholders, shareholders and others, to agree to major restructuring plans.
“We must act, not to reward the executives of the Big Three for their failures, but to invest in the millions of Americans who could face the consequences of those failures,” said Senate Majority Leader Harry Reid (D-Nev.), who added that the bill was “no blank check or blind hope.”
GM, Ford and Chrysler came to Congress last week seeking $34 billion in low-interest federal loans to get through the recession after submitting detailed turnaround plans demanded by Pelosi and Reid. But the funding request, above the $25 billion the companies sought last month, made some lawmakers worry that the government would have to continue shoveling money to Detroit.
When pressed during last week’s hearings, GM and Chrysler said they needed a combined $14 billion to get through the end of March.
Despite lawmakers’ skepticism about Detroit’s commitment to reform, there is broad agreement by Democrats and Republicans that a failure of one or more of the automakers would be another devastating hit to the U.S. economy.
“The bill shows a path we can move forward on, and I am cautiously optimistic that we will reach an agreement that can get the necessary votes in the Congress,” said Sen. Carl Levin (D-Mich.), one of the auto industry’s strongest supporters.
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