Politics & Government

Aid to automakers seems doomed amid wrangling

In this July 15, 2008, photo, a General Motors sign is seen through a fence at an auto plant in Arlington, Texas. (AP Photo/LM Otero)
In this July 15, 2008, photo, a General Motors sign is seen through a fence at an auto plant in Arlington, Texas. (AP Photo/LM Otero) AP

WASHINGTON — Even as top Senate Democrats rolled out new legislation to provide $25 billion in loans to America's domestic automakers, the prospects of emergency funds appeared bleak Monday as the White House and Congress tangled over how best to help the ailing industry.

Senate test votes are likely as soon as Wednesday, and supporters of helping the cash-strapped Big Three need 60 votes to stop an anticipated Republican-led filibuster. So far, backers conceded, they're far short of that.

Senate Majority Harry Reid, D-Nev., nonetheless pressed ahead.

"I ask my colleagues . . . that in the face of tremendous economic pain and uncertainty, we not wait until January," he said.

The heads of General Motors and Chrysler have warned that their companies might file for bankruptcy before year's end if they don't get bridge loans from the federal government. They want at least $25 billion, although they haven't said exactly how they'd spend it.

Automakers going into bankruptcy could bring economic hardship in all 50 states, they warn, since auto-parts suppliers are located coast to coast. The head of the United Auto Workers has made similar warnings. The UAW chief and the chief executive officers of the Detroit Three will testify Tuesday before the Senate Banking Committee.

Under Reid's bill, which amends the Oct. 3 bailout legislation signed by President George W. Bush, qualifying carmakers and their auto-parts suppliers could get 10-year loans if they convince the government that the money would prevent a "systemic adverse effect" on the U.S. economy. Companies would have to submit plans that explain how the loans would better position them for long-term viability.

A similar bill that provides for 7-year loans instead of 10-year ones was introduced in the House.

The legislation requires them to have been manufacturing in the United States for 20 years, a provision that rules out most foreign-owned companies with plants in America. The treasury secretary would distribute loans to firms that, if they were to fail, would displace the largest number of employees and would threaten automotive suppliers and the network of dealerships.

Any firm that gets a loan would pay a 5 percent interest rate for five years and 9 percent after that. The Treasury would receive a stock warrant or some other preferred instrument of debt that protects the taxpayers' investment.

Senior executive officers who earn more than $250,000 couldn't receive bonuses or other forms of executive compensation until the loan is repaid, and they couldn't retire with lucrative "golden-parachute" compensation.

If the test vote fails Wednesday, Reid will seek a vote on a plan to provide more benefits to unemployed workers as well as the auto aid.

Even that faces a struggle. Giving special aid to automakers, White House spokeswoman Dana Perino said, would set a dangerous precedent.

"Once you start down that road," she said, "it's a slippery slope to other industries that might say they need help."

The White House, while stressing that it doesn't want the auto industry to fail, hopes to provide funds by altering the terms of a separate $25 billion loan package to the automakers, passed in September, that was designed to help them make more fuel-efficient vehicles.

"We're surprised that Senate Democrats would propose a bailout that fails to require automakers to make the hard decisions needed to restructure and become viable," Perino said.

The White House got support from several Republicans, notably Sen. Richard Shelby, R-Ala., the top Republican on the Senate Banking Committee.

In a statement to McClatchy, Shelby said through a spokesman: "It would be wrong for the federal government to bail out a private company and pick winners and losers in the marketplace. Practically, it would be foolish to funnel billions of taxpayer dollars to prop up a failed business model. Those things adversely affect all of us."

There were some indications that a few Republican lawmakers are reluctant to go home for the holidays without doing something, particularly with Democrats pounding away at the issue.

"We've helped the sharks and we've helped the whales," said Sen. Barbara Mikulski, D-Md. "Now it's time to help the minnows" — consumers and workers.

Unions, car dealers and others were exerting strong pressure on members.

Sen. Christopher Bond, R-Mo., noted that while members may disagree on how to help the industry, there appears to be strong sentiment that something needs to be done.

If most Republicans continue to resist the $25 billion, however, the Senate will need 60 votes to cut off debate and there are 49 Democrats, 49 Republicans and two independents who caucus with Democrats. The Democrats would need votes from nine Republicans, which at the moment looks hard to obtain.

They have the option of waiting until January, when the 111th Congress will convene. With at least 58 Democrats, the path is likely to be smoother.

However, Reid wants quicker action

"In the six weeks since Congress recessed, our economic crisis has deepened," Reid said. "We have seen numerous bankruptcies, hundreds of thousands of jobs lost, consumer confidence plummeting and unemployment up to 6.5 percent nationwide. . . . If ever there were a time for bipartisan solutions, this is it."

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