$15 billion Detroit bailout stalls over GOP reservations

McClatchy NewspapersDecember 9, 2008 

WASHINGTON — Efforts to craft a $15 billion auto-industry rescue plan stalled Tuesday as key Republican lawmakers raised serious questions about the package, but Democrats remained optimistic that they could get an agreement soon.

Democratic congressional leaders are pushing legislation to provide immediate help for General Motors, Chrysler and, potentially, Ford, and to create a "car czar" with broad authority over how the money is spent and the companies are revamped.

Late Tuesday, the White House and congressional leaders said they'd reached an "agreement in principle" but no details were available _ and it remained unclear if Republican lawmakers would accept it. Sen. Carl Levin, D-Mich., said the apparent compromise "gets us to the 20 yard line, but getting over the goal line will take a major effort."

A final agreement proved elusive as Republicans raised questions about the extent of the overseer's authority and insisted on stronger action against car companies that get the money but still don't regain long-term financial health.

The Democratic plan "fails to achieve our goal of securing the long-term viability of ailing auto companies," said Senate Republican leader Mitch McConnell of Kentucky.

All sides agreed on key principles. There appeared to be little dispute over creating an industry overseer or restricting executives' pay, curbing dividends and insisting that taxpayers be repaid first.

GM and Chrysler, which face bankruptcy, would get the aid immediately; Ford has said it doesn't need the money right away.

McConnell, who voiced his concerns in a Senate floor speech, and others wanted precise assurances that strong car companies would arise from the effort.

He said he couldn't back legislation "that provides the patient with taxpayer dollars yet doesn't (include) the commitment that the patient will change its ways so that future help isn't needed."

Sen. John Ensign, R-Nev., went further, saying that he was prepared to use procedural maneuvers to block the legislation if necessary. Such moves could mean that 60 Senate votes would be needed for action, which could be tough to get in the lame-duck body, which has 49 Republicans.

"A great deal of progress has been made on auto legislation that will protect the taxpayer and ensure that short-term financing is available only to companies prepared to undertake the dramatic restructuring necessary to become viable and competitive. Taxpayers hould not be asked to finance any firm unwilling to make the difficult decisions across the scope of their businesses--including deep and meaningful concessions from all stakeholders. We will continue to work with Congress to finalize legislation the President can support."

The developments were another bump in what's become a rocky road for Detroit's Big Three. They initially sought $25 billion in emergency aid last month, a plan that collapsed because members of Congress found that the Detroit executives lacked specific answers as to what they'd do with the money, and because they flew private jets to Washington to seek a bailout from stressed taxpayers.

The executives returned last week, this time asking for $34 billion and armed with detailed restructuring plans.

Democrats said Tuesday that their $15 billion plan continued to have some momentum, though they were growing frustrated.

"We cannot let a few people stop doing the people's business," Senate Majority Leader Harry Reid, D-Nev., warned after his prediction Tuesday morning of an agreement "in the next few hours" proved to be wrong.

The White House sounded a similarly hopeful but cautious note. Spokeswoman Dana Perino praised "cooperation in spirit," but also said that Democrats must remember "our insistence that long-term viability be reflected in the legislation . . . (it) is something that we have held very strong feelings about, and that has not changed."

Perino continued: "Taxpayers hould not be asked to finance any firm unwilling to make the difficult decisions across the scope of their businesses _ including deep and meaningful concessions from all stakeholders. We will continue to work with Congress to finalize legislation the President can support."

The administration defined viability last month in a letter to congressional leaders.

A company "must demonstrate a reasonable prospect that it will be able to make payments on principal and interest on the loan as they become due, and that the applicant has a positive net present value, taking all existing and future costs into account," Commerce Secretary Carlos Gutierrez and Energy Secretary Samuel Bodman said.

The companies also must have "a product mix and cost structure that is competitive in the U.S. marketplace."

The Democrats' bill would require the companies to produce a restructuring plan by March 31.

People familiar with the talks said that Republicans — and possibly some Democrats — were concerned that the carmakers would return to Congress for further help next year.

Republican lawmakers are said to be concerned that once President-elect Barack Obama takes office and Democrats increase their numbers in Congress, it will be easier for the auto companies to get more money, perhaps with fewer strings attached.

McConnell warned that by merely allowing the government to cancel any aid if changes aren't made rather than requiring such action, "we open the door to unlimited federal subsidies in the future."

However, countered House Financial Services Committee Chairman Barney Frank, D-Mass., any legislation "can be redone. You know, these bills aren't forever."

Lawmakers, though, face a possibly more difficult hurdle: explaining even a $15 billion loan to wary constituents.

"We are maybe taking a little bit more time, frankly, because people have looked at the way the $700 billion rescue plan went through," Frank said.

That plan, aimed at helping ailing financial institutions, passed in October. Lawmakers from both parties have said that constituents have complained that they see few results.

(Kevin G. Hall contributed to this article.)

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