Senate GOP holds fate of auto bailout
The House approved a $14-billion bailout package for U.S. automakers Wednesday, but the fate of the plan -- and of some of the nation’s most storied companies and brand names -- remained uncertain because of deep-seated Republican opposition in the Senate, where Democrats cannot pass the bill without GOP help.
The 237-170 House vote came after the White House and Democratic leaders finalized a deal empowering a government “car czar” to force the companies into bankruptcy by next spring if they don’t restructure.
But many Senate Republicans are weary of government bailouts and worry that providing money to automakers will lead other industries to seek aid. Many on Capitol Hill also are convinced they should have attached more strings to the $700-billion Wall Street bailout.
The White House dispatched Vice President Dick Cheney, Chief of Staff Josh Bolton and top economic advisor Edward Lazear to Capitol Hill to sell the deal, but they were barraged by questions during a two-hour, closed-door meeting and failed to secure much if any support, senators said.
“People are rightly concerned that the automakers and unions won’t follow through. Many simply don’t believe that the changes that need to be made will be made,” Sen. John E. Sununu (R-N.H.) said after the meeting. He said Cheney, Bolton and Lazear acknowledged that the bill wasn’t as strong as they would have liked but urged Republicans to back it.
Supporters including administration officials, Democratic congressional leaders and many independent economists warned that hundreds of thousands of jobs could be lost and hundreds of related businesses damaged or destroyed if one or more of the U.S. automakers failed.
“The consequences of defeating this bill would be disaster for the economy that is already in trouble,” House Financial Services Committee Chairman Barney Frank (D-Mass.) told his colleagues during the debate. Thirty-two Republicans joined 205 Democrats in supporting the bill.
A central goal of White House and congressional negotiators has been to design a bill tough enough on the Detroit automakers and United Auto Workers union to pass muster in Congress.
“It’s a bill that provides bridge financing to one of two possibilities . . . fundamental restructuring or bankruptcy,” said Joel Kaplan, White House deputy chief of staff for policy. “We wanted to make sure it was tough and that this was not bridge financing to nowhere.”
Days ago, negotiators slashed the $34 billion requested by the Big Three executives to a more modest stopgap fund -- just enough to keep General Motors Corp. and Chrysler afloat until spring. Negotiators also agreed to create a federal monitor, appointed by the president, to oversee the companies’ efforts to restructure their operations to ensure future viability.
Senate Democrats aimed to have a vote by the end of the week.
In the final stages of the negotiations, the monitor was given authority to act as a de facto bankruptcy judge with great power over the operations and future shape of companies that accept government aid.
GM has said it needs $10 billion to make it until March 31 and Chrysler has asked for $4 billion. Ford Motor Co. has said it does not need emergency loans at this point, but it’s unclear whether the automaker will participate in the government-supervised restructuring to get money later.
Through the first three quarters of this year, GM and Ford have lost a combined $30 billion; while sales through November for all three carmakers combined have declined 22% compared with the same period in 2007 -- that’s nearly 1.7 million fewer cars and trucks sold in the United States. Chrysler, which is a private company, has not disclosed its financial results.
If the restructuring plans don’t meet standards set out in the bill for demonstrating future viability, such as refinancing existing debt and becoming competitive with other automakers on costs and the types of vehicles produced, the government would be required to recall a company’s loan, which would almost certainly trigger a bankruptcy filing.
The plans must be submitted by March 31, or by April 30 if the monitor agrees to an extension because workable plans are nearing completion.
The legislation would prohibit any additional federal money from going to the automakers if they failed to come up with an acceptable restructuring plan, but would open the door to longer-term government financing if they did.
The auto czar also would have veto power over any transactions exceeding $100 million by the companies while the loans were outstanding. Washington would receive ownership stakes in the companies.
And the bill contains a prohibition on stock dividends, restrictions on executive compensation and severance packages, and a requirement that companies receiving loans not own or lease private aircraft.
GM supports the bill. Chrysler did not directly back the legislation but said it was encouraged by the progress.
Even with the tougher provisions added, at least a half-dozen Senate opponents said they preferred that the companies seek bankruptcy protection now and restructure afterward rather than get government help.
“I think there’s still some effort that has to be made,” said Sen. George V. Voinovich (R-Ohio), a strong supporter of the auto industry who said he would vote for the legislation.
Democrats hold a narrow 50-49 Senate majority and they need at least 10 Republicans to vote for the bailout to overcome procedural hurdles.
Centrist Republicans such as Susan Collins of Maine and Norm Coleman of Minnesota said they were undecided. Coleman echoed several other lawmakers in saying he wanted the car czar to have more power to force the companies, unions and other stakeholders to restructure.
One of the leading opponents, Sen. Richard C. Shelby (R-Ala.), called the bill a “travesty” that would remove the incentive for the automakers to make major changes and lead to billions more in government money in the future.
“Unless Chrysler, Ford and General Motors become lean and innovative and competitive in the marketplace, this is only delaying their funeral,” Shelby said.
The size of the bailout was reduced from $15 billion in previous drafts to the $14 billion GM and Chrysler said they needed. At White House insistence, the money comes from an existing $25-billion loan fund created to help U.S. automakers retool their factories to make more energy-efficient cars. The bill authorized Congress to replenish the fund, which House Speaker Nancy Pelosi (D-San Francisco) has promised to do early next year.
The final sticking point was overcome when congressional Democrats removed a provision to require automakers to stop funding lawsuits against California and more than a dozen other states over new limits on greenhouse gas emissions. The White House told Democratic leaders there was no chance the bill would pass if that provision remained.
But the new state emissions standards continued to complicate the legislation, resulting in the House and Senate considering two slightly different versions that could further delay final action.
The House version requires automakers taking money “to comply with applicable fuel efficiency and emissions requirements.” But some Senate Republicans balked at the language, noting that it encompassed the new state limits in California and elsewhere.
The version of the bill introduced by Senate Democrats says automakers must comply with only federal emissions rules. The different versions would have to be reconciled before any bill could go to President Bush for his signature.