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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.
Nov. 20 (Bloomberg) — I sat in the window of a cafe this month in Annapolis, Maryland, a sailing town near Washington, counting parked cars. “Honda, Honda, Nissan, Toyota, Honda, Lexus (made by Toyota), Mazda, and a battered 1970s Cadillac.”
No wonder the U.S. carmakers are in meltdown and begging to be plugged in to the Treasury’s life-support machines.
Don’t be misled, though — the something that is rotten in the auto industry has nothing to do with the credit crunch, and everything to do with years of mismanagement, shoddy products and bad choices.
Consider the credit-rating histories of General Motors Corp. and Ford Motor Co. For both companies, the rot started all the way back in August 2001, when Standard & Poor’s put the A grades they had enjoyed for a decade on review for downgrade. In October of that year, they each suffered a two-level cut to BBB+ that left them just three moves away from junk status.
So seven years ago, the car companies were already on the slide, after years of their Japanese rivals stealing market share with improved production methods and better reliability. That was well before the words “credit crunch” had become as ubiquitous as “would you like large fries with that?” or “the new Bond film isn’t as good as the previous one.”
Pirates of Detroit
In other words, give us what we want or suffer the consequences. That sure sounds like blackmail to my ears, except even Somali oil-tanker pirates have so far stopped short of trying to pilfer $25 billion from their victims.
So, what to do? Nobody, least of all President-elect Barack Obama, wants to see the 250,000 people who work directly for the big three U.S. automakers tossed on the scrapheap, or the other 4 million workers whose job security is at risk somewhere along the supply chain from the drawing boards of Detroit to the car showrooms of America.
There seems to be a groundswell of support building for the concept of retraining and retooling auto workers away from churning out four-wheeled gas guzzlers to put them instead at the vanguard of the fight against climate change.
“Wouldn’t the benefits be greater if the U.S. government spent $25 billion to $75 billion — the current dollars proposed to bail out the auto industry — to train engineers, support infrastructure and work in the much-neglected alternative energy space?” wrote Tom Sowanick, who helps manage $20 billion as chief investment officer of Clearbrook Financial LLC in Princeton, New Jersey.
I Spy iCar
New York Times columnist Thomas Friedman suggested earlier this month that Apple Inc. CEO Steve Jobs should be persuaded to sign up for “national service” and run a car company for a year, long enough to invent the iCar.
I think Friedman is on to something. Sure, the iCar would be available in any color as long as it’s white (with a black model to be introduced as soon as all the early adopters have a pearlescent model in the driveway), and the windshield would be scratched to opacity within weeks. It would probably run on fresh air, though, and the packaging would be to die for.
First off, the U.S. government would need to absorb all those legacy pension and health-care costs that the automakers have used as an excuse for years to dodge getting their collective act together. Splitting the welfare issue from the business travails would deliver some much-needed clarity to the true financial position of the carmakers.
Then, turn the entire industry over to people who might make a difference. Give GM to Jobs, let Microsoft Corp. founder Bill Gates run Ford and allow billionaire Warren Buffett to try his hand at Chrysler. In five years, I bet that car counting in Annapolis would deliver a very different result.
(Mark Gilbert is a Bloomberg News columnist. The opinions expressed are his own.)