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Framework of auto industry rescue set

Puzzanghera and Bensinger are Times staff writers.

The White House and Democratic congressional leaders reached broad agreement on a $15-billion auto industry bailout measure Tuesday night, but continued to negotiate details as they aimed at their next challenge: persuading deeply suspicious members of Congress to go along with another government handout to big business.

A final deal could be announced as early as this morning after House and Senate negotiators agreed to Bush administration demands for tougher government oversight and expanded powers for the proposed “car czar,” according to White House and congressional aides.

The remaining stumbling block was a Democratic provision to force automakers that receive government money to stop funding lawsuits against California and more than a dozen other states to overturn tougher emission standards.

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Though supported by environmentalists, that provision was opposed by the White House, and its inclusion could alienate Republicans whose votes are needed to get the bill through the Senate.

Every vote is crucial. Many lawmakers, looking back on the $700-billion Wall Street rescue package they approved in October, wish they had imposed more restrictions on how those funds would be used. Now those regrets are making it harder to sell aid for Detroit.

“There’s bailout fatigue right now,” said Rep. Roy Blunt of Missouri, the second-ranking House Republican. “People are tired of ‘Give us the money and we’ll see what we need to do with it.’ I think that’s why . . . a lot more questions are being asked both by taxpayers and by members of the House and Senate.”

While big financial institutions such as Citigroup and large banks got tens of billions in aid without their chief executives having to trek to Washington hat in hand, the chief executives of General Motors, Ford and Chrysler have come pleading twice -- and most likely will have to accept tougher conditions, such as tighter government oversight and more limits on their pay.

“We’re faced with a reality that we’ve given away almost $1 trillion in taxpayer money with what we thought were some strings attached to a bunch of financial industry people,” Rep. Gary Ackerman (D-N.Y.) told the Big Three chief executives last week. “And you face the fury around here with the American public of having really no accountability for any of that money.”

Draft language in the auto bill gets very detailed -- even specifying that any automaker receiving government money agrees not to own or lease any corporate aircraft. The requirement was added after the heads of GM, Ford and Chrysler were sharply criticized for flying to Washington in separate private planes last month to make their first appeal for help. The second time, they drove in hybrid cars -- and promised to sell their jets.

Industry supporters said there was a double standard at work.

“We didn’t ask that the CEOs of the banks drive to town in a Wells Fargo armored truck,” complained Sen. Sherrod Brown (D-Ohio). “We didn’t ask for them to appear before us. We didn’t ask them to come up with a plan on how they were going to spend the money.”

As now written, the bailout bill would quickly grant a combined $15 billion in loans to GM and Chrysler. (Ford has said it does not yet need government aid.)

The public appears divided. A Los Angeles Times/Bloomberg poll released Tuesday found 47% support an auto industry bailout and 42% oppose it. The poll had a margin of sampling error of plus or minus 3 percentage points. A Gallup Poll also released Tuesday found 51% opposed and 43% in favor, though support increased to 52% when respondents were told that one of the Big Three would go bankrupt without assistance.

After a meeting of House Democrats on Tuesday, Financial Services Committee Chairman Barney Frank (D-Mass.) said there was strong backing for preventing such failures.

“For most of us, the question is how to do it, not whether,” he said. “Because this economy -- which is already in trouble -- would take a staggering hit if you had this kind of collapse.”

Congressional Democrats and the White House have agreed to create a presidentially appointed monitor, or “car czar,” as part of the bailout. Under the agreement, the monitor could call in short-term government loans if the companies did not by March 31 begin executing restructuring plans to make them financially viable.

Both sides had hoped to have a final agreement Monday. But Frank said concerns about how the Wall Street bailout legislation turned out had slowed the process.

The automaker in the most dire straits -- GM -- has been trying to drum up public support. Starting last week, the company has granted the media unusual access to key company figures, including interviews with at least three members of the board of directors.

GM also bought a full-page ad in this week’s trade publication Automotive News, apologizing for its failures.

“At times we violated your trust by letting our quality fall below industry standards and our designs become lackluster,” read the ad.

Despite the mea culpa, a key talking point among GM leaders has been to express support for Chairman and Chief Executive Rick Wagoner, whom Senate Banking Committee Chairman Christopher Dodd (D-Conn.) has called on to resign.

“The management has worked very hard to get where we need to go,” Kent Kresa, who has been an outside director at GM since 2003, told The Times in an interview Tuesday.

But GM’s future depends on getting a $4-billion government loan by the end of the month, Wagoner told Congress last week. After House Democrats unveiled a draft bill Monday that requires government approval of any company expenditures over $25 million and demands that automakers drop their support for a lawsuit over California’s new greenhouse gas vehicle emissions standard, GM said it would abide by the conditions.

The lawsuit provision, which would also affect other states that have adopted California’s standard, is one of the sticking points between the White House and congressional Democrats, Frank said.

A bailout bill needs 60 votes to overcome a threatened filibuster in the Senate, where Democrats hold only a slim majority before newly elected members take office next month. While several Republicans from states with Big Three auto plants would be inclined to support the bailout, it could be difficult to get enough votes to end a filibuster. Senate Minority Leader Mitch McConnell (R-Ky.) hails from one of those states but was critical of the bill Tuesday.

“The proposal . . . fails to achieve our goal of assuring long-term viability of ailing auto companies,” McConnell said. He said he was concerned that the bill did not go far enough in forcing the companies to restructure.

Former Michigan Gov. James Blanchard, who helped pass a bailout of Chrysler in 1979 while serving in Congress, said the company faced similar criticism then. The difference this time is the atmosphere created by the $700-billion Troubled Asset Relief Program.

“I think that the frustration over TARP and the inability of members of Congress to question and scrutinize the leaders of the financial services industry has caused a much more detailed pillorying of the auto companies and the auto executives,” he said.

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jim.puzzanghera@latimes.com

ken.bensinger@latimes.com


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