Top Republican Senators Oppose Automaker Bailout

WASHINGTON — Hardline opponents of an auto industry bailout branded the industry a "dinosaur" whose "day of reckoning" is near, while Democrats pledged Sunday to do their best to get Detroit a slice of the $700 billion Wall Street rescue in this week's lame-duck session of Congress.

The companies are seeking $25 billion from the financial industry bailout for emergency loans, though supporters of the aid for General Motors Corp., Ford Motor Co. and Chrysler LLC have offered to reduce the size of the rescue to win backing in Congress.

Senate Democrats intended to introduce legislation Monday attaching an auto bailout to a House-passed bill extending unemployment benefits; a vote was expected as early as Wednesday.

A White House alternative would let the car companies take $25 billion in loans previously approved to develop fuel-efficient vehicles and use the money for more immediate needs. Congressional Democrats oppose the White House plan as shortsighted.

Majority Democrats will need at least a dozen GOP votes in the Senate to prevent opponents from blocking their measure _ assuming all Senate Democrats support it. Senate Republican Leader Mitch McConnell of Kentucky questioned whether there was sufficient Democratic support for an auto bailout in a statement released Sunday.

"The silence from the Democrat rank and file on this matter has been deafening," McConnell said.

So far two Republicans publicly have voiced support for the idea. Several others, including Minnesota Sen. Norm Coleman on Sunday, have indicated they might accept a rescue under strict conditions.

Sens. Richard Shelby of Alabama and Jon Kyl of Arizona said it would be a mistake to use any of the Wall Street rescue money to prop up the automakers because a bailout would only postpone the industry's demise.

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"Companies fail everyday and others take their place. I think this is a road we should not go down," said Shelby, the senior Republican on the Senate Banking, Housing and Urban Affairs Committee. "They're not building the right products," he said. "They've got good workers but I don't believe they've got good management. They don't innovate. They're a dinosaur in a sense."

Added Kyl, the Senate's second-ranking Republican: "Just giving them $25 billion doesn't change anything. It just puts off for six months or so the day of reckoning."

House Speaker Nancy Pelosi, D-Calif., said over the weekend the House would aid the ailing industry, though she did not put a price on her plan. "The House is ready to do it," said Democratic Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee. "There's no downside to trying."

Frank's committee has scheduled a Wednesday hearing on an auto bailout.

It is a more difficult fight in the Senate, given the Democrats' slim edge and President George W. Bush's opposition. Bush wants to speed the release of $25 billion from a separate loan program intended to help the automakers develop fuel-efficient vehicles and have that money go toward more urgent purposes as the companies struggle to stay afloat. The loan program was approved by Congress last year, but more legislation would be necessary to change its purpose.

"That should be done this week," Commerce Secretary Carlos Gutierrez said. He said reopening the Wall Street bailout and including automakers could attract other industries looking for bailouts.

"If you start that, where do you stop?" he asked. "There's a line of companies of industries waiting at Treasury just to see if they can get their hands on those $700 billion."

The disagreement raises the possibility that any help for automakers will have to wait until 2009, when President-elect Barack Obama takes office and the Democrats increase their majority in the Senate.

At least two Republican senators support an automaker bailout _ George Voinovich of Ohio and Kit Bond of Missouri. But if the Republicans are seen as neglecting an industry that inevitably collapses, they risk lasting political problems in Midwestern industrial states that can swing for either political party.

Obama won most of the manufacturing states in the presidential race, including Ohio, a perennial battleground, and Indiana, which had not voted for a Democrat for president since 1964. Obama easily won Michigan after Republican John McCain publicly pulled out weeks before Election Day.

Former GOP House Speaker Newt Gingrich said young voters, who overwhelmingly supported Obama over Republican John McCain in the presidential election, could get turned off by expensive corporate bailouts that they will eventually have to pay for.

If "those 20-year-olds and 30-year-olds start to figure out they're going to pay the taxes, they're not getting the billions, I think you might find a lot of dissatisfaction by next summer," Gingrich said.

Sen. Carl Levin, D-Mich., said automakers are working to adapt to a changing consumer market, but they need immediate help to survive the current economic crisis. "This is a national problem," Levin said. "The auto industry touches millions and millions of lives."

The companies are lobbying lawmakers furiously for an emergency infusion of cash. GM has warned it might not survive through year's end without a government lifeline.

"It's not the General Motors we grew up with. It's a General Motors that is headed down this road to oblivion," said Shelby. "Should we intervene to slow it down, knowing it's going to happen? I say no, not for the American taxpayer."

United Auto Workers President Ron Gettelfinger would not flat-out reject further concessions by members on top of the two-tiered wage system and other concessions the union gave the automakers last year, but he bristled at calls for further sacrifices by his members.

"Let's go to AIG, Bear Stearns, active and retired workers: Did anybody go in and ask them to give back wages and benefit levels?" Gettelfinger said on WDIV-TV in Detroit. "What about the bond traders? Did anybody ask them? What about the cleaners in the building? Why would the UAW be any different?"

"We made an agreement, and we made major concessions," he said. "So how can you blame the autoworkers?"

Obama said he believes aid is needed but that it should be provided as part of a long-term plan for a "sustainable U.S. auto industry" _ not simply as a blank check.

"For the auto industry to completely collapse would be a disaster in this kind of environment," Obama said in a "60 Minutes" interview airing Sunday night on CBS. "So my hope is that over the course of the next week, between the White House and Congress, the discussions are shaped around providing assistance but making sure that that assistance is conditioned on labor, management, suppliers, lenders, all of the stakeholders coming together with a plan _ what does a sustainable U.S. auto industry look like?"

Lawmakers opposed to the bailout say Chapter 11 might be a better option than government loans and they cite the experience of airlines that have gone through the process of reorganization.

But GM CEO Rick Wagoner, also appearing on Detroit's WDIV, said: "This idea that you just go into Chapter 11 and hang around for three months ... this is a fantasy. This is not going to work. Most important to what is going to happen is most people will stop buying the cars of a bankrupt company."

Shelby and Levin were interviewed on NBC's "Meet the Press" and Shelby also appeared with Frank on CBS' "Face the Nation." Kyl spoke on "Fox News Sunday" and Gutierrez was on "Late Edition" on CNN.

Comments

[shamaniceconomist]

Shouldn't Detroit have to prove they have the potential to make a profitable product before they get this kind of venture capital?

[MaxHeadroom]

Shouldn't the big looser financial businesses (you know...the ones with the smartest guys in the room) that will receive monies from the 700 billion tax payer bailout plan guarantee that they can give a positive, profitable return on the taxpayers investment before they get this kind of money as well?

Let the free market rules apply to everybody, and not have socialism for some, and capitalism for the rest, otherwise this looks like another bullcrap move to break up the union movement in this country once and for all.

[sunshinerain]

I agree completely with the union-busting intent of Bush & Co. dragging their heels. They like their citizenry desperate and hungry, not unionized.

[harriscrl3]

Boy these rethugs dont want any manufacturing job in America we are supose to be white collar jobs or blue collar service jobs that pays crap for wage thats the republicans idea of America. Granted there has to be strings attach but to jus tlose our automobile manufacturing capability boy these GOPers are hard hearted.

Funny I wanted AIG and all these wallstreet companies to go under but they convince me that it was in my interest to save them now they just want the auto industry to go under.

Sometimes I think the GOP is just the ANTI party it has no new ideas its just ANTI whatever the democrats say. Most Americans say the government should help the auto industry that we should have a choice of buying domestic or imported automobiles. I wonder how they will explain to their constituents that they told GM as Browkaw said to DROP DEAD.

Carol

[Icantbelieveher]

You know, they're right! Save that 25 billion for the banks. It won't do anything for the economy, but it will ensure the bonuses the CEO's need in order to keep their position in 5% of the population!

Why should republicans start caring about the jobs that the middle class would lose? They've never cared before!

Someone better tell them they had better get their priorities straight, or there won't be even one republican elected to the U.S. government for a long time to come!!!

The automakers are not the only business who will be touched by their failure. There are tons of manufacturing companies who make the parts for those cars/trucks, the dealers who sell the cars, the warranty companies that cover the cars with warranties, etc. They had better stop and think, or we are in for a world of hurt, much worse than what's going on now!!!

[bygollymissmolly]

They say it is 1 in 12 American jobs. If that happens, we will be in a depression for a very long time.

[mjb5406]

The Republicans care only about bailing out an industry that can line the GOP coffers with more money... Wall Street and the banking industry. They bailed out AIG and Goldman Sachs with the claim "we can't afford to let them fail", now they're saying "let the big 3 automakers go out of business". The Republicans are showing, once again, that all they care about is their money and could care less about anything else.

[TimmySlagle]

The automakers need to reorganize.

And a bankruptcy will force that reorganization.

The wont go completely out of business, since they have assets, and produce marketable product. They'll just shave off the non-productive sectors of their businesses.

Which is how it's supposed to work. It is how the business sector grows and modernizes. Cuba still looks like it's 1958, l because that's when they stopped capitalism.

[Hawka]

Shaving off takes money takes capital and time, whose going to really buy these assets at a substantial price when just about every other auto-maker in the industry is taking hits, Toyota reported a 76% profit loss since the financial crisis began. You can't expect much in the way of loans either with all the scrutiny on credit now. And while they're busy reorganizing, if they ever can, their 2.5 million some odd workers will be off on their own in an ever shrinking market for their field...

[TimmySlagle]

"whose going to really buy these assets at a substantial price when just about every other auto-maker in the industry is taking hits"

Someone will.

If you were giving away the assets, there would be a long line. So there is value there, now you just have to find the price.

It's probably somewhere in between 0 and a trillion dollars

[Gasparilla]

No doubt the management made serious mistakes and miscalculations, but the question at hand is what is the long range view. If these companies go down, it will have a huge ripple effect throughout the economy, right down to the local dealerships. 25 billion is a lot of money, but so is a trillion for this stupid Iraq war. So are all the tax cuts for the wealthy and big oil companies. Letting companies sink or swim is the way it should be, but what that produced in 1929 is a depression it took a decade to pull out of. Sometimes there's simply the bigger picture. In return for money, we should simply tell the automakers we want you producing a fleet of cars averaging at least 35 mpg, as a start.

[piul05]

I read somewhere that we're talking 3 million unemployed people, all direct and inderect business considered.

[TimmySlagle]

That's only if they were to go completely out of business.

They won't

People need cars, so somebody has to build them.

Not all of the 3 million will be rehired, but that's why America is so prosperous, we set unnecessary workers free from time to time, to find better places in the economy to apply their skills.

[Quaoar]

Of course they oppose it. They want the money for their own pork-barrel projects.

[Erdgeist]

Sens. Richard Shelby of Alabama and Jon Kyl of Arizona don't seem to realize that Detriot had nothing to do with the punctured housing and credit bubble -- Wall Street did with the help of the Republican Party. It was a criminal conspiracy, in other words.

With more credit and these ten cars, Detriot will be saved.

http://seekingalpha.com/article/106184-ten-cars-that-could-save-detroit

[shamaniceconomist]

And new management? The Seeking Alpha story emphasizes that GM killed the EV-1. And then most of the cars they list are either not selling so well, or not selling at all because they're still on the drawing board.

[jchurch]

If the American Auto Industry is to survive it has to jump ahead of the curve and quit building last generation cars (like the gas guzzling Escalade that Bush gave a tax credit for). The auto industry is going to have start building cars right now that have a drastically increased fuel economy and are moving aggressively in the direction of alternative fuels. The fact is the auto industry went down the very road that the Bush Administration paved for ALL OF US, a road built on funneling profits to Big Oil. The Auto Industry should take Shelby and Kyle's advice to its logical "Free Market" conclusion and ditch their alliance with Big Oil which obviously is not paying off for the auto-makers. In the end, it won't pay off for the Oil Industry either when everyone switches away from petrol fuel dependent transportation. Then maybe Big Oil will go bankrupt too and will come crying to the government for some Corporate Welfare handouts, just like Banking and the Auto-makers. Will the Republicans support Big Oil like they are now "supporting" their former friends in the Auto Industry? Republicans like Shelby and Kyle are not acting out honor to the American taxpayer. They are acting out of the mean spirited petty narrow-minded agenda that is driving the Republican party to alienate every facet of American society.

[sunshinerain]

Great post, right on target and making the connections. People LOVE their SUVs - that's not all the automaker's fault. It's the status symbol aspect of it - people are in denial - oh, the car companies FORCED these big boats on us - rather, consumer demand "forced" SUVs on the American car companies. Who wants to drive around in some little (read European pinko) fuel-efficient cars No, we want giant restaurant portions, giant SUVs, everything BIG BIG BIG!! This is America!!!!! There is a cultural aspect of this people don't want to admit to - just heap blame on auto companies and unions, rather than the millions of Americans who think "big" equates with "status symbol" - big giant McMansions, big giant SUVs, etc.

[shengirl]

I think we've all deduced by now that if the Republicans oppose something, then supporting it is the decent and/or intelligent thing to do.

[Icantbelieveher]

That's the deduction the informed part of America has come to!

[DaBluAce]

oh it is ok to bail out your wall street and bank buddies who aren't even using the money the way it was even intended to be used but you will not help the automakers? what kind of cr a p o la is that....GA folks are you listening....you see wha the dinosuars of the re p uf party want to do.....see how they want to make the middle class suffer.....You better try to vote J Martin in the run off election in Dec...in times like these Pres. Elect Obama will need all the help he can get to pass some things that those earth burner re pu ff want to see destroyed because they have a ax to grind

[Mr-Mikey]

So it's ok that AIG and other companies get bailed out, take the bailout money and Go to resort after resort....

Yet one of the fundamental job producing sectors of our economy tanks and dies right before us.

An they wonder WHY they lost the election and over 30 seats...

[kasinca]

Wall Street cronies need bail out to pad their pocket books, American workers are not worth it.

[Icantbelieveher]

Nail on the head!

[cdnnewsjunky]

"Top Repub Senators Oppose Automaker Bailout" - Huffpo

Then logic and reason dictate that the automakers should be bailed out.

[feo]

If there were manufacturing facilities in Arizona, youbetcha Kyl would be in favor of a bailout. Ask him about subsidies to the mining indutsry and the oil industry. Youbetcha those are necessary. Ask him about bailing out his old pal Charles Keating. Youbetcha that was necessary.