Prospect for US car-industry bailout dims
Chances dimmed that a last-minute plan being crafted by Republican United States senators, with White House support, to provide $25-billion to bail out US automakers would receive enough backing from Democrats to pass before the end of this week.
As the hours ticked down on this year’s legislative session, Democratic leadership expressed deep scepticism the talks would lead to a compromise acceptable to all parties.
Congress has at most two days remaining in its post-election session. Without a deal in that time, any bailout is likely to have to wait until the new Obama administration takes over in January.
“I won’t say it’s completely over.
I’m still having conversations with people.
But it doesn’t look good,” Senator Robert Bennett, a Utah Republican, said of chances lawmakers would strike a deal that could pass.
Failure to craft a deal carries the risk that one or more of the US automakers—General Motors, Ford or Chrysler—could be forced into bankruptcy.
Senate Minority Leader Mitch McConnell said in remarks on the Senate floor that the compromise “is the only proposal being considered” that has any chance of becoming law now.
The approach, spearheaded by Republicans Christopher Bond of Missouri and George Voinovich of Ohio, would amend a plan that extended $25-billion approved in September for helping Detroit retool factories and make more fuel-efficient cars.
A number of strings attached to the retooling money would have to be cut or reworked to make it available immediately for operational and other pressing needs.
“We’ve made great progress. We’re down to wording challenges,” Bond said in remarks on the Senate floor on Wednesday night.
CEO hot seat
The rush to reach a deal comes after US auto executives spent their second straight day on Capitol Hill pleading for $25-billion in government aid.
The day’s hearings, before the House Financial Services Committee, got off to a rousing start when panel chairperson Barney Frank asked how the government could justify a bailout for banks and insurers, but not the automakers.
“Frankly, there seems to me to be an inherent cultural bias,” Frank said. “Aid to blue-collar employees is being judged by a standard different than white-collar employees.”
The weakened economy and global credit crisis pushed the US government into bailing out companies, including insurer American International Group, investment bank Bear Stearns, and mortgage companies Fannie Mae and Freddie Mac.
Congressional Democrats have proposed using money from the $700-billion bailout package for banks to aid the automakers, but the Bush administration—with only weeks left before it cedes power to President-elect Barack Obama—has expressed opposition.
In addition, other opponents of the bailout have argued that reorganisation under bankruptcy would be the best solution to the carmakers’ problems.
Senate Democratic Majority Leader Harry Reid said he wished “we could move forward” on a Bill, but said that legislators were still trying to find a Bill that could be sure to pass.
However, the US House is scheduled to leave Washington on Thursday for the year and “we have to face reality”, the Senate leader said. “We’ll work to see what we can get done in the next 12 hours.”
Other legislators have said some kind of deal is coming.
McConnell said a compromise is the only way for legislation to become law. He proposed to tap $25-billion of auto retooling loans already approved by Congress but not yet disbursed by the Energy Department—an approach supported by the White House.
White House spokesperson Dana Perino said the administration remains opposed to giving automakers money from the $700-billion financial rescue package, as some Democrats have urged. “There’s no appetite for that,” she said.
But changing the existing legislation could have one key opponent—Barney Frank.
Frank, champion of a bailout plan similar to the one stalled in the Senate, said amending the retooling legislation, as he understood it, would meet resistance in the House.
“It would be sending the wrong signal to rescind the environmental restrictions,” the Massachusetts Democrat said of core provisions in the retooling bill.
While dealmaking dominated the hallways of Congress, the auto executives at Wednesday’s hearings continued to face withering criticism.
One point that several members of Congress hit on was the way the CEOs got to Washington.
Gary Ackerman, Democrat from New York, noted the irony of the CEOs flying on private jets and “getting off with tin cups in their hands”.
“Couldn’t you have downgraded to first class or something, or jet-pooled ... to get here?” he asked. “It’s almost like seeing a guy show up at the soup kitchen in a high hat and tuxedo.”
The executives on Wednesday’s panel—GM CEO Rick Wagoner, Ford CEO Alan Mulally and Chrysler CEO Robert Nardelli—all flew to the hearings on private jets.
Ron Gettelfinger, head of the United Auto Workers union, also testified at the hearing but flew a commercial flight to Washington.
Jeb Hensarling, a Texas Republican, also expressed scepticism about helping the industry.
“How do I know that you will not become the next AIG? Twenty-five billion now, $25-billion next month, $25-billion the month after that,” Hensarling said.
“What I have not heard is a plan that convinces me that with the $25-billion, that you will achieve sustainability,” said Hensarling.—Reuters