GOP Could Put Brakes on Auto Rescue Bill
The House approved the plan late Wednesday on a vote of 237-170. It would infuse money within days into cash-starved General Motors Corp. and Chrysler. Ford Motor Co., which has said it has enough cash to make it through 2009, would also be eligible for aid.
GOP leader Sen. Mitch McConnell said his side hadn’t seen the measure as of Wednesday morning and wouldn’t agree to immediate votes.
“Republicans will not allow taxpayers to subsidize failure,” he said, although he added that the auto situation would be addressed by the end of the week.
Democrats and the White House hoped the Senate would vote on the legislation as early as Thursday. But based on concerns raised by GOP senators — and a wavering level of support even among Democrats — the timing of a vote remains uncertain, the Associated Press reported.
With many Republicans balking and many senators absent from the lame-duck postelection debate, mustering 60 Senate votes to advance the measure was proving tricky for its backers.
White House spokesman Tony Fratto acknowledged Thursday morning that “there’s some explaining to be done.”
“A lot of members of the Senate have questions, on both sides of the aisle, about the strength of the so-called auto czar,” he said on CNN. “We think this auto czar will have very strong, sweeping powers, and we think that’s reflected in the legislation. So we’re going to keep talking to them (senators). The president and other members of the administration will be reaching out to Republican senators this morning.”
The beaten-down stock price of Ford Motors and General Motors fell further in Wednesday trading after GOP Sen. Richard Shelby of Alabama said he intended to slow the auto bailout bill. GM shares fell 5.5 percent to $4.44, while Ford shares fell 3.1 percent to $3.13.
“There’s a lack of unity as to whether something will or will not happen on the auto bailout, and that’s partly why the market lost some ground too,” Michael James, senior trader at regional investment bank Wedbush Morgan told Reuters.
On Tuesday’s NewsHour broadcast, Shelby laid out his case against the auto rescue deal, saying the companies could be saved, but not with their current business models or management.
“I think it’s flawed in the fundamental way they’re approaching this. One, this is the down payment on a bailout that will go probably into next year; they’re talking about next spring. It’s $15 billion, more or less. It’s a lot of money.
“But it’s only the beginning,” he said “I’ve said that it’s a bridge to nowhere. It’s a bridge loan. No bank in the United States, no bank in the world would make this loan. They would summarily dismiss it, the application. So you’ve got to ask yourself, will this solve the big three’s basic problems? The answer is no.”
Sen. Chris Dodd of Connecticut defended the proposal.
“For us to sit back today and walk away from this — and I know there are those who would like to do that, and maybe that’s what will happen in the next 24 hours — and then we run the risk of losing a major automobile manufacturer in this country, thousands of jobs.
“The word last Friday was 533,000 jobs were lost in this country in one month, and certainly none of us want to wake up in January and discover that America no longer has a viable automobile industry.”
The compromise measure could still see a House vote later Wednesday and become law by the end of the week. Money could be disbursed within days to cash-starved GM and Chrysler LLC, while Ford Motor Co. — which has said it has enough liquidity to stay afloat — would be eligible for federal aid.
If enacted in its current form, the measure would create a government “car czar” named by President George W. Bush to dole out the loans, with the power to force the carmakers into bankruptcy next spring if they didn’t cut quick deals with labor unions, creditors and others to restructure their businesses and become viable.
The scene on Capitol Hill so far has been eerily reminiscent of the tense atmosphere of early October, when lawmakers variously argued, cajoled, threatened and lobbied one another, ultimately passing a much-debated $700 billion bailout plan for the financial industry, the AP reported.
At the White House Wednesday, Deputy Chief of Staff Joel Kaplan said the administration had yet to read the fine print of its “conceptual agreement” with congressional Democrats.
For his part, Kaplan said: “We have not seen final text of legislation that we have agreed to.”
He indicated clear support for it, saying Bush would personally lobby Republicans to back it and was dispatching Chief of Staff Josh Bolten to Capitol Hill to make the case for it.
“We’ll be talking retail to individual senators to try to win their support,” Kaplan said, adding that it’s critical that the legislation have a clear definition of long-term viability for the companies.
The president’s support came only after Democrats agreed to scrap language — which the White House had called a poison pill — that would have forced the carmakers to drop lawsuits challenging tough emissions limits in California and other states, said congressional aides.
Environmentalists are already livid that the measure draws the emergency loans from an existing loan program to help carmakers retool their factories to make greener cars.
Kaplan said the Bush administration would work with President-elect Barack Obama’s team on choosing the “car czar,” acknowledging that Bush’s tenure ends in 41 days and the automakers’ woes will continue well into 2009.
The Big Three would have to negotiate with labor unions, creditors and others and submit blueprints on March 31 to the industry czar showing how they would restructure to ensure their survival, although they could be given until the end of May to negotiate with the government on a final agreement.
The car czar would have say over any major business decisions by the automakers while they were taking advantage of federal aid, with veto power over any transaction of $100 million or more. The companies — including the private equity firm Cerberus, which owns a majority stake in Chrysler — would have to open their books to the government overseer.
And if Chrysler defaulted on its loan, Cerberus would be responsible for reimbursing the government.
Mr. Obama defended the auto bailout as necessary given the threat a potential Big Three collapse could pose to the already battered economy.
“As messy as it may be, I think there’s a sense of, ‘Let’s stabilize the patient,’ ” he said in an interview published in Wednesday’s editions of the Chicago Tribune and Los Angeles Times.
He called the auto industry’s plight — lackluster sales, choked credit and widespread economic turmoil — “the perfect storm.”