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The House voted 237 to 170 to approve an emergency plan to prevent the collapse of the nation’s domestic automobile industry, but the measure faces serious opposition in the Senate, where Republicans oppose a White House-brokered deal to speed $14 billion to General Motors and Chrysler.
The White House is trying to sell the plan to conservative lawmakers, but many of them are unconvinced the plan would compel Detroit automakers to make the painful changes needed to restore them to profitability. Even some Republican advocates of the bailout said it is unlikely to attract sufficient GOP support to win approval in the closely divided Senate.
At the heart of the conflict is a debate over how to best help the car companies not only survive the deepening recession but rid themselves of a legacy of debt, high production costs and plush worker benefits that have left them unable to compete with their foreign competitors, according to the Washington Post. GM, Chrysler and Ford already have moved to streamline costs; along with the UAW, they have offered to make additional concessions. But many Republicans think the automakers’ problems could be better resolved by a bankruptcy court with legal power to dissolve existing contracts than by a government “car czar” whose actions could be swayed by Washington politics.
“Instead of the car czar, this ought to be titled the president’s puppet," says Sen. Bob Corker (R-Tenn.), echoing the concerns of many of his GOP colleagues. Corker unveiled an alternate proposal that would force bondholders in the car companies to accept equity as partial payment; force the UAW to immediately reduce worker pay packages to match Nissan, Toyota and Honda; and ban compensation to idled workers, according to the Washington Post.
"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," says Sen. John Ensign (R-Nev.).
Ensign said a car czar would not have the expertise to deal with the auto companies. “When GM, Ford, Chrysler, their management teams have not been able to run their companies, obviously, very well, how does anybody expect some car czar or some politician to be able to make the decisions that are right from a business standpoint?”
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.
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 also requested access to a federal line of credit but has said it does not expect to need any money immediately.
Lawmakers had hoped to provide $15 billion for the Detroit automakers from a loan program created this fall to fund the development of fuel-efficient technologies. But in recent days, they decided to set aside some money so smaller companies could use the loan program for its original purpose.
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, according to the Washington Post. In the case of Chrysler, which is owned by the private-equity firm Cerberus Capital Management, the government would take warrants from Cerberus. The companies also would be required to submit to the authority of a car czar, who would seek to "facilitate an agreement" for long-term viability in talks with the car companies and their employees, retirees, unions, creditors, suppliers, dealers and shareholders.
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 a variety of taxpayer protections, including audits of the car companies 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 their top executives while the loans were outstanding. And they would be required to sell their corporate jets — assets that left a bad impression on lawmakers when the auto executives flew separately from Detroit to Washington in November to ask for government help.
