Democrats push $15-B bailout for carmakers

Wednesday, December 10, 2008


Democrats push $15-B bailout for carmakers


WASHINGTON, D.C.: Democrats proposed a $15-billion bailout package for the troubled US auto industry Monday in a compromise that sources say may still not gain approval from the White House.

The proposal offers less than half of the $34 billion General Motors (GM), Chrysler and Ford said they would need to stave off a “catastrophic collapse” of the nation’s automotive industry.

The low-cost, government-backed loans are intended to sustain them through March, which will give President-elect Barack Obama time to address the problem after he takes office on January 20.

“Fifteen billion is the maximum that’s available, given the president’s threat to veto anything else,” said US Representative Barney Frank, one of the lawmakers spearheading talks on the rescue plan.

Officials close to the talks said earlier Monday that the US legislature could authorize the rescue package, which calls for massive restructuring and tough government oversight, by mid-week.

But a senior Bush administration official who requested anonymity said a deal on Monday was unlikely because the White House and the Democrats who control the US Congress were at odds on the issue of the long-term viability of the Big Three US automakers.

US President George W. Bush said that “the definition of viability is open to discussion,” and that “viability means that all aspects of the companies need to be reexamined to make sure that they can survive in the long term.”

“Hopefully we’ll get something done,” he told ABC television in an interview.

“These are important companies, but on the other hand, we just don’t want to put good money after bad.”

White House spokeswoman Dana Perino, who earlier had said a deal was “likely” on Monday, responded to the proposed bill by saying the administration was “reviewing draft legislation we received this afternoon and are continuing our discussions with Congress.”

“We’ll continue to work with members on both sides of the aisle to achieve legislation that protects the good faith investment by taxpayers,” the spokeswoman said.

The proposal calls for a presidential designee, or “car czar” to oversee the restructuring of the Big Three US automakers, distribute the funds and report to Congress on their progress in achieving “long-term viability,” according to a copy of the bill obtain by Agence France-Presse.

Automakers will have to continue to improve the fuel-efficiency of their fleets and also look into using their excess capacity to build bus and rail cars for public transit.

The bill also requires the automakers to sell their private jets and places strict limits on executive compensation.

Senate Majority Leader Harry Reid said the blueprint aimed to “give the automakers the chance to clean house and return to a responsible path toward profitability.”

“The jobs of millions of American workers are at stake, along with the financial security of millions of families. So while we take no satisfaction in loaning taxpayer money to these companies, we know it must be done,” he said.

General Motors, which had warned it could run out of cash as early as January, urged swift passage of the bill and vowed it will “abide by the conditions proposed in the bill and will continue our restructuring with great urgency.”

“We have listened to Congress and have put together a restructuring plan that will deliver a stronger, sustainable GM in a quicker timeframe and without the negative market consequences that could result from bankruptcy,” GM said in a statement.

Chrysler said it was “pleased that progress is being made” and that it looked forward to working with lawmakers and “to completing our restructuring in an orderly fashion.”

Ford, which has said it has enough cash on hand to weather the current downturn but requested a $9-billion line of credit to hedge against worsening conditions or the bankruptcy of one of its competitors, said it would not “not be seeking a short term bridge loan” under the bill.

“But Ford fully supports an effort to address the near-term liquidity issues of GM and Chrysler, as our industry is highly interdependent and a failure of one of our competitors could affect us all,” Ford said in a statement.

Obama has called a collapse of the auto industry “unacceptable,” and said Sunday he wanted a supervisory process that would keep the companies’ “feet to the fire.”
-- AFP