House passes $14 billion auto bailout package

WASHINGTON (CNN) — The House of Representatives handily passed a bill Wednesday night that would provide up to $14 billion in bridge loans to automakers, but Republican opposition cast doubt about the bill’s fate in the Senate later this week.

The U.S. House approved an auto bailout package Wednesday, but it could hit a roadblock in the Senate.

The stopgap measure, approved by a vote of 237 to 170, is designed to let the new Congress and incoming administration of President-elect Barack Obama craft a long-term solution. It would also give the companies time to negotiate with creditors and the United Auto Workers union on additional concessions needed to stem their ongoing losses.

Thirty-two GOP representatives voted with 205 Democrats in support of the bill while 20 Democrats and 150 Republicans opposed the bill.

In Michigan, the home of the three major U.S. automakers — Chrysler, Ford and General Motors — eight Republicans joined the six Democrats in the state’s delegation in voting for the measure. A ninth Michigan Republican, Timothy Walberg, did not vote.

Seven other Republicans that voted for the bill are from nearby Midwestern states that are also home to auto plants. However, outside of the auto belt, the bailout had little Republican support.

Even Democrats couldn’t come to complete agreement on the bill, with House and Senate Democrats going their separate ways on one of the criteria the “car czar” must consider in determining an auto company’s long-term viability plan.

House Democrats used language requiring that autos meet stricter “applicable” fuel efficiency and emissions standards — which would cover consideration of state standards such as those adopted in California and New York — while the Senate version of the bill calls for vehicles to meet “federal” standards, which are not as high as some state benchmarks.

A Senate Democratic leadership aide told CNN that Senate Republican leader Mitch McConnell told Senate Majority Leader Harry Reid Wednesday morning that the bill would never pass the Senate with the House language.

House Speaker Nancy Pelosi wanted the higher efficiency standard so that liberal Democrats who are not inclined to help the auto manufacturers would feel they had assurances that these companies would adopt and make more fuel-efficient cars, according to House Democratic aides.

However, even if language about the fuel efficiency standards is resolved, Senate Republicans still aren’t likely to flock behind the bill.

“I don’t think the votes are there on our side of the aisle,” reported Sen. George Voinovich of Ohio, one of few vocal Republican backers of the bill.

“It’s not gonna pass right now,” echoed Sen. Richard Shelby, R-Alabama, a fierce critic of the bill.

Voinovich and Shelby spoke after Senate Republicans huddled behind closed doors in the Capitol on Wednesday to weigh the merits of the bailout. Vice President Dick Cheney and White House Chief of Staff Josh Bolten attended the meeting — called “spirited” by one senator — to sell the bill the White House negotiated with congressional Democrats.

Several senators said they were concerned the so-called “car czar,” created by the legislation, would not have enough power to force the troubled automakers to restructure to become profitable.

“I have concerns about the power of the czar,” said Sen. Norm Coleman, R-Minnesota, a moderate who Democrats have hoped would vote for the bill, “that he actually has some real power. And I think that’s a concern a lot of my colleagues have right now.”

“The car czar needs the authority to create a de facto structured bankruptcy. Not consulting. Not calling meetings. He needs the capacity of a master of bankruptcy to force things to happen,” said Sen. Robert Bennett, R-Utah.

Some senators oppose any assistance to the automakers, saying they should file for bankruptcy, but White House spokeswoman Dana Perino pointed out that many lawmakers from both sides of the aisle believe that allowing “a disorderly bankruptcy could be fatal to U.S. automakers and have devastating impacts on jobs, families and our economy.”

“As a result, they also agree we should find a way to foster the companies’ restructuring so that they can become viable and profitable,” she said. “We believe the legislation developed in recent days is an effective and responsible approach to deal with troubled automakers and ensure the necessary restructuring occurs.”

Other senators said they were concerned that the carmakers might never pay taxpayers back for the loans, meant to keep General Motors and Chrysler afloat until they can finalize a long-term viability plan — by March 31, according to the legislation.

GM has said it needs $4 billion by the end of the month to continue operations, and believes it’ll need an additional $6 billion in the first three months of 2009. Chrysler has said it needs $4 billion by the end of the first quarter.

Ford, which has more cash on hand than its U.S. rivals, is not expected to tap into this bailout in the coming months.

Source: CNN

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Mr Obama’s spokesman, Robert Gibbs, said yesterday that the plight of automakers was one of a number of issues discussed in a two-hour meeting with Mr Bush to discuss the transfer of power at a time of war and financial crisis. Other issues included housing, mortgage foreclosures, and, more generally, “the need to get the economy back on track”.

The parlous state of the American car industry was highlighted last Friday when General Motors – the biggest US car manufacturer – reported a $2.5 billion net loss for the third quarter, bringing its total losses to nearly $57 billion since the beginning of 2005.

Ford Motor Company’s $129 million quarterly loss, meanwhile, brought to nearly $24.5 billion the deficit it has run up since plunging into the red in 2006. The privately-held Chrysler LLC is also thought to be fast running out of cash – one reason, analysts believe, why its parent, Cerberus Capital Management, was so eager to sell Chrysler to General Motors.

The New York Times, citing unnamed people familiar with the discussion, said that Mr Obama went into his post-election meeting with Mr Bush primed to urge him to support emergency aid for the car industry.

The Bush Administration is reluctant to give carmakers access to the bailout fund, even though the Democrats say it could legally do so.

Linking the issue with the Colombia free trade deal could delay any move until after Mr Obama’s inauguration on January 20. US union leaders oppose the agreement because of numerous murders of trade unionists in Colombia at the hands of right-wing paramilitary squads closely linked to the Colombian armed forces.

Obama Asks Bush to Provide Help for Automakers

This failing economy and troubled auto industry is the perfect storm for Obama and the Democrats, if the auto industry was strong — how could you get it to change direction? The writing was on the wall some eight years ago that the oil age was coming to an end – that to continue to pursue it would lead us into difficulty. And it was one of the hallmarks of Al Gore’s presidential campaign. Now we have seen the results of continuing down the same path. But with this disaster or more stripping of the sector – there is opportunity; the free market idea is to allow the auto industry to fail, or it can be bailed out under conservative socialism, or we can forget about the old titles and give the auto-industry the money it needs but with the strings attached – that it retools for the future car. Why can’t we have a hybrid/electric or an electric SUZ? And this merchandise can be exported – the market should be thrilled.

Bush is arguing – he’ll give Obama this – if in return Obama cedes with the Republican position on trade with Columbia. And it is a weak argument – because what Obama is saying – we will be happy to trade with you – but you are going to have to pull your act together when it comes to workers rights. This carrot and stick approach may do more to change conditions in Columbia – than all the diplomacy in the world. Doubtful if this is a chip that can be traded because it has a long term goal.

WASHINGTON — The struggling auto industry was thrust into the middle of a political standoff between the White House and Democrats on Monday as President-elect Barack Obama urged President Bush in a meeting at the White House to support immediate emergency aid.

Mr. Bush indicated at the meeting that he might support some aid and a broader economic stimulus package if Mr. Obama and Congressional Democrats dropped their opposition to a free-trade agreement with Colombia, a measure for which Mr. Bush has long fought, people familiar with the discussion said.

The Bush administration, which has presided over a major intervention in the financial industry, has balked at allowing the automakers to tap into the $700 billion bailout fund, despite warnings last week that General Motors might not survive the year.

Mr. Obama and Congressional Democratic leaders say the bailout law authorizes the administration to extend assistance.

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Mr. Obama went into his post-election meeting with Mr. Bush on Monday primed to urge him to support emergency aid to the auto industry, advisers to Mr. Obama said. But Democrats also indicate that neither Mr. Obama nor Congressional leaders are inclined to concede the Colombia pact to Mr. Bush, and may decide to wait until Mr. Obama assumes power on Jan. 20. […]

As the auto industry reels, rarely has an issue so quickly illustrated the differences from one White House occupant to the next. How Mr. Obama responds to the industry’s dire straits will indicate how much government intervention in the private sector he is willing to tolerate. It will also offer hints of how he will approach his job under pressure, testing the limits of his conciliation toward the opposition party and his willingness to stand up to the interest groups in his own. [….]

Obama has called on the Bush administration to accelerate $25 billion in federal loans provided by a recent law specifically to help automakers retool. Late in his campaign, Mr. Obama proposed doubling that to $50 billion. But industry supporters say the automakers, squeezed both by the unavailability of credit and depressed sales, need unrestricted cash now, simply to meet payroll and other expenses.

On Friday, Mr. Obama said he would instruct his economic team, once he chooses it, to devise a long-range plan for helping the auto industry recover in a way that is part of an energy and environmental policy to reduce reliance on foreign oil and address climate change.

[….]

Democrats close to both Mr. Obama’s transition team and to Congressional leaders seemed willing to call Mr. Bush’s bluff, calculating that he would not want to gamble that G.M. — an iconic, century-old American corporation with business tentacles in every state — would fail on his watch and add to the negative notes of his legacy. Also, economists as conservative as Martin Feldstein, an adviser to a long line of Republican presidents and candidates, have called more broadly for stimulus spending of up to $300 billion.

The major automakers — G.M., Ford and Chrysler — are each using up their cash at unsustainable rates. The Center for Automotive Research, which is based in Michigan and supported by the industry, released on Election Day an economic analysis of the impact of one or all of them failing. If the Big Three were to collapse, it said, that would cost at least three million jobs, counting autoworkers, suppliers and other businesses dependent on the companies, down to the hot-dog vendors and bartenders next door to their plants.

[…]

Organized labor is not the only interest group with influence in the Democratic Party that is weighing in as Mr. Obama plans his transition. Environmentalists are adamant that any aid be conditioned on the auto industry’s dropping of its opposition to higher fuel-efficiency standards and investing more in new technology. That puts them at odds with unions, who oppose any strings, leaving it to Mr. Obama to mediate.

Both as a candidate and now as president-elect, Mr. Obama has been in contact with former Vice President Al Gore, who last year won the Nobel Peace Prize for his work on climate change. In a column published in Sunday’s New York Times, Mr. Gore wrote that “we should help America’s automobile industry (not only the Big Three but the innovative new start-up companies as well) to convert quickly to plug-in hybrids that can run on the renewable electricity that will be available.”

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