Bailout clears House; hurdles high in Senate
The House vote was 237-170 for the $14 billion package. Even some supporters say it is unlikely to pass the Senate.
WASHINGTON - The House last night approved an emergency plan to prevent the collapse of the domestic auto industry, but the measure faces serious opposition in the Senate, where Republicans are rebelling against a White House-brokered deal to speed $14 billion to cash-starved General Motors Corp. and Chrysler LLC.
After battling through the weekend to reach a compromise with congressional Democrats, the White House dispatched chief of staff Joshua Bolten yesterday to sell the plan to restive Republican senators. But many GOP lawmakers emerged from a combative luncheon with Bolten unconvinced the plan would compel Detroit automakers to make the painful changes necessary to restore them to profitability.
After mostly partisan debate, the House voted 237-170 to approve the measure. But with Sen. Richard C. Shelby (R., Ala.) and other conservatives threatening to block consideration of it, even some Republican advocates of the bailout said it was unlikely to attract sufficient GOP support to win approval in the closely divided Senate.
"I don't think the votes are there on our side of the aisle," said Sen. George V. Voinovich (R., Ohio), a stalwart champion of the auto industry. "Some effort needs to be made to respond to the concerns of my colleagues."
At the heart of the conflict is a debate over how to best help the Big Three automakers not only survive the deepening recession but also rid themselves of a legacy of debt, high production costs, and plush worker benefits that have left them unable to compete with their more nimble foreign competitors.
GM, Chrysler and Ford Motor Co. have already moved to streamline costs; along with the United Auto Workers union, they have offered to make additional concessions. But many Republicans think the automakers' problems could be more efficiently resolved by a bankruptcy court with legal power to dissolve existing contracts than by a presidentially appointed "car czar" whose actions could be swayed by Washington politics.
"If we don't have the forced restructuring plans in place, many of us don't believe that American car companies will come out of this in a competitive position and the taxpayers' money will be wasted," said Sen. John Ensign (R., Nev.).
Democrats have resisted forced restructuring, arguing that under the Bush administration it could amount to open season on the UAW. They also sympathize with the automakers' argument that bankruptcy proceedings would scare off potential buyers.
"People buying cars want to know that they'll continue to have a relationship with an entity that can service the cars," House Financial Services Committee Chairman Barney Frank (D., Mass.), the chief House negotiator on the package, said during House debate.
White House press secretary Dana Perino said in a statement: "Many Republicans and Democrats agree that a disorderly bankruptcy could be fatal to U.S. automakers and have devastating impacts on jobs, families and our economy."
GM thanked the House for its support and encouraged the Senate "to act soon so that we can continue at full speed on the restructuring and advanced technologies plans that will form a stronger, more viable GM."
The measure would speed up to $14 billion in emergency loans to the Detroit automakers, enough to keep GM and Chrysler in business through the end of March. Ford has also requested access to a federal line of credit but has said it does not expect to need any money immediately.
In exchange for the cash, the automakers would be required to give the government warrants for stock worth 20 percent of the value of the loans.
The companies also would have to submit to the authority of a car czar, who would seek to "facilitate an agreement" for long-term viability in talks with the automakers, their employees and retirees, their unions, creditors, suppliers, dealers and shareholders.
Bush would have to appoint the czar within days. Kaplan said administration officials had been in talks with President-elect Barack Obama about that appointment, raising the possibility that a compromise candidate might be named.
If the talks failed to produce a plan to cut costs and achieve financial viability by March 31, the car czar would be required to revoke the loans and submit a new restructuring plan that could include the option of Chapter 11 bankruptcy protection. If a company failed to progress toward those goals, it would be barred from receiving additional government assistance.
The measure contains various taxpayer protections, including audits by the Government Accountability Office and government veto power over transactions worth more than $100 million, a provision intended to block investment overseas. The companies also would be barred from paying dividends to shareholders or bonuses to top executives while the loans were outstanding, and would have to sell their corporate jets.
Rescue Plan Also Has Transit Help
The $14 billion measure
to keep U.S. automakers in business also has a provision to aid many of the nation's transit systems, including NJ Transit and SEPTA.
would provide federal guarantees for complex financial transactions between transit agencies and investors. Many of these deals are in danger of default because of the credit crisis, exposing transit agencies to billions of dollars
in payments at a time when
they are trying to cope with growing riderships.
NJ Transit and SEPTA
are among about 30 authorities affected.
NJ Transit is facing demands
of payment of $100 million to $300 million. SEPTA has a
$21 million exposure.
and their allies in Congress have warned that rail and bus systems could be crippled without the federal backup. But the provision has met with sharp criticism from several key lawmakers.
- Staff and Wire Reports
How They Voted
Representatives from the Philadelphia area who voted for the auto-industry rescue bill were Robert E. Andrews (D., N.J.), Robert A. Brady (D., Pa.), Michael N. Castle (R., Del.), Chaka Fattah (D., Pa.), Tim Holden (D., Pa.), Patrick Murphy (D., Pa.), Allyson Y. Schwartz (D., Pa.), Joe Sestak (D., Pa.) and Christopher H. Smith (R., N.J.).
Voting against the bill were Charles W. Dent (R., Pa.), Jim Gerlach (R., Pa.), Frank A. LoBiondo (R., N.J.), Joseph R. Pitts (R., Pa.) and H. James Saxton (R., N.J.).