Democrats Propose New $25 Billion Bailout, Would Limit Pay

WASHINGTON — Prospects dimmed on Monday for the $25 billion bailout that U.S. automakers say they desperately need to get through a bleak and dangerous December.

Though all sides agree that Detroit's Big Three carmakers are in peril, battered by the economic meltdown that has choked their sales and frozen loans, the White House and congressional Democrats are headed for stalemate over how much government money should go toward helping them.

Behind the logjam is a troubling reality for the car companies: Bailout fatigue has set in at the White House and on Capitol Hill, where many in both parties have spent the past few weeks being berated by constituents for agreeing to the $700 billion Wall Street rescue.

The new debate comes as the financial situation for General Motors Corp., Ford Motor Co. and Chrysler LLC grows more precarious. GM has said it could run out of cash by year's end without government aid.

A Senate auto bailout bill unveiled Monday noted that 355,000 U.S. workers are directly employed by the auto industry, and an additional 4.5 million work in related industries. That doesn't count the 1 million retirees, spouses and dependents who rely on the companies for retirement and health care benefits.

Still, not only has President George W. Bush made it clear he doesn't want to dole out any new aid for the automakers, congressional officials say his administration has privately informed top Democrats it won't even use at least half of that huge rescue fund approved last month to aid the financial industry.

The Senate Democrats' measure would carve out a portion of the Wall Street bailout money to pay for loans to U.S. automakers and their domestic suppliers, but aides in both parties and lobbyists tracking the plan privately acknowledge they are far short of the votes to pass it.

Republicans insist that any automaker bailout money instead come from redirecting a $25 billion loan program approved by Congress in September to help the industry develop more fuel-efficient vehicles. The GOP would lift restrictions on that money to speed it to the carmakers.

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Democrats want to leave that money alone and give the industry an additional $25 billion from the financial bailout funds _ for a total of $50 billion.

Senate Majority Leader Harry Reid, D-Nev., said he would hold a vote during this week's postelection session on a bill that pairs the auto industry bailout with an extension of jobless aid. But in an acknowledgment of the long odds facing such a plan, Reid also laid the groundwork for a straight up-or-down vote on the more widely supported unemployment measure, which is probably all that can pass this week.

House Speaker Nancy Pelosi, D-Calif., has held off scheduling a vote on an auto bailout bill until it becomes clear whether such a measure can pass the Senate, where it would need a 60-vote supermajority to advance.

The Senate's proposed auto aid bill would provide loans with initial interest rates of 5 percent in exchange for a stake in the companies or warrants that would let the government profit from future gains. Loan applicants would have to give the government a plan for "long-term financial viability."

But the measure stops short of giving the government a say over the companies' operations through an oversight board or hard limits on executive compensation. While taking advantage of the program, the companies could not pay dividends or award bonuses to executives making more than $250,000 a year or give large "golden parachute" payments to top people.

A House version drafted by Rep. Barney Frank, D-Mass., goes further, requiring that U.S. automakers immediately repay the loans next spring if they don't give the government an acceptable restructuring plan that shows they can survive, including details on how they will transition to making vehicles that use less gasoline.

"(W)e think it essential that loans be linked to significant progress in the ability of the companies to eventually market energy-efficient cars with broad public appeal," Frank, the Financial Services Committee chairman, said in a statement Monday night.

Unlike the Senate measure, the House plan would be limited strictly to Detroit's Big Three.

A vote on the Senate measure could come as early as Thursday.

The White House, meanwhile, took pains to clarify its position on the bailout, saying the administration "does not want U.S. automakers to fail." But press secretary Dana Perino said the administration steadfastly opposes "raiding" the $700 billion bailout plan to help Detroit.

"We're surprised that Senate Democrats would propose a bailout that fails to require auto makers to make the hard decisions needed to restructure and become viable," Perino said in a statement.

President-elect Barack Obama has said he believes aid for U.S. carmakers is needed, but he hasn't specified where it should come from. He says the money should come as part of a long-term plan for the industry.

Sen. Carl M. Levin, D-Mich., who crafted the Senate Democrats' bill and spoke with Obama Monday, said the president-elect has "not signed off on any particular language or any particular approach" but generally backs loans to the struggling auto industry.

With all sides agreeing something should be done, Levin said, "There's a reasonably good chance that we can get this done this week."

The chief executives of the Detroit auto companies and the head of the United Auto Workers union are to make their case for the aid Tuesday at a Senate Banking Committee hearing. The House Financial Services panel is to hold a similar session Wednesday.

But the package is a tough sell to the public. In a Gallup Poll conducted Nov. 7-9, only 20 percent said providing loans and other help to auto companies should be a top economic priority for Obama. Given five choices, aid to the auto industry tied with assistance for large financial institutions as least-favored options.

Most _ 60 percent _ said enacting stricter regulations for financial institutions should be a No. 1 goal. About half named helping homeowners, about the same number supported cutting taxes for the middle class, while a third cited a new economic stimulus package.

"The automobile industry, obviously, is of enormous importance in our country, and not to have the automobile industry would have very, very severe economic consequences," said Sen. Arlen Specter, R-Pa. But, he added, "The question that I would submit, and heard from my constituents: 'Who's next?'"

Some top Republicans are against any additional federal automaker help, no matter where it comes from.

"There's no indication that the car companies would do anything different than what they've been doing, which has been a big failure, which is why they need the bailout. And there's no reason to throw money at a problem that is not going to get solved," said Sen. Jon S. Kyl of Arizona, the No. 2 Republican.

___

Associated Press Writers Ken Thomas, Jennifer Loven and Alan Fram contributed to this story.

Comments

[autobailout]

As a lifelong democrat, I am appalled by my elected reps trying to get these bailouts through. The banks didn't deserve it and the auto industry absolutely doesn't deserve it. Everyone is hurting. I am a small business owner on the UWS of Manhattan and I am eating egg salad from a plastic container every day. These auto workers make $56 an hour and their cost of living is low. It's like making $200 on one of the coasts. Our lawmakers need to start thinking of the people who elect them, not special interests.

Protest the bailout at http://www.autoindustrybailout.com/petition/

Enough with the handouts unless you're going to give them to everyone and not just select groups of people.

[PhilipTaylor]

Democrats can pass this Auto Bill but may not override the veto!

We must show that the Bush Administration is willing to sacrifice the Financial Safety and Security of 18,000,000 people (4 x 4.5 million) for a less than 4% share of the $700 Billion Bailout package!

This should be Largest and perhaps Final "Black-eye" for Bush and Company!

[Rule Of Law]

Give more money to greedy bankers. Sure.

Give a little of that Wall Street gravy to the companies that employ blue collar workers--hell no!

Class warfare!

[Sundialsvc4]

We need to revitalize, not just the "auto" industry, but "industry in general."

This country used to be responsible for more than 50% of the industrial output of the entire WORLD ... and I'm talking "less than sixty years ago." In OUR OWN generation.

We have the capability to re-start that capacity. But here's the catch: we don't actually HAVE THE MONEY to do any sort of "bail-out." Conjuring money out of thin air is precisely what got us into this mess in the first place.

The domestic auto industry finds itself in trouble because its products are necessarily expensive ... and Americans, lacking solid wages in their pocket, can't afford them. Even foreign companies operating on our soil are facing the same problems. The standard-of-living that the Unions are demanding, though, is one that we ONCE COULD afford ... not even sixty years ago.

"Produce it HERE." Produce it "NEARBY." The plant is still there: every small-town in this nation has one. Accountants stare at their balance-sheets, cluck and say "that's redundant ... that's inefficient." But their view is distorted by the fact that it's confined to the margins of their ledgers.

[PKSSK]

I am a dem, but the way the dem's have handled the Wall Street bail out by supporting and trusting this corrupt admin to be transparent has been a disaster and slap in the face to the American people. Now the senate dems will bail out the deceitful Lieberman and go on to give away the tax payers money to the big 3 auto makers who refuse to apply the same standards that make foreign competition successful. Let the big oil and gas compaines share their profits by bailing out the big 3 who have made them so profitable. I have come to believe that both parties in congress, especially dem's, are totally inept at leading and standing up to do the right thing for the people!!! We need term limits to prevent the rich elite in the sentate and house from the comradery and fellow loyalty to their congressional partners instead of following the wishes of the people who elected them. Congress has become an even greater corrupt system of government , as they have willingly given up their authority to represent the people who elected them to power. Instead, they prefer to eliminate the voices of the people to prevent their participation in government.

[MetalCanuck]

We need to let these guys go to Chapter 11 then help their competition WHO WILL BUY THEM to make green cars. These guys will NOT change and we will be screwed with just 35MPG cars (which is a JOKE) instead of the electric cars we should have.

[Lupin77]

These people don't know what they're doing. Needs new blood - new ideas on how to solve this mess. End the bailouts and solve the housing foreclosure mess - that's what started all this and the solution was to deal with this originally and then that idea suddenly went out the window. It needs to be dealth with.

[Mooretone]

Simply ludicrous--some of the posts here!

Imagine when it's your turn to become unemployed and the country sais, "Screw you, you were paid too much for the job you did, and so you are to blame for Management's greed and piss-poor forecastings."

30% of the Working Americans have Post-Secondery Educations--most are High School educated and as such, are restricted to Labor-based employment. They are the Majority, by the way. Academia in-collusion with Government Officials, and Industry Leaders, simply stole the American Economy--today, like Big Business, they sell "Titles of Entitlement" rather than educating tomorrow's "Thinkers". This entire U.S impending "Depression" lay at the feet of that 30% who failed to learn from Academia, it's motus (Plato) "To be able to think for themselves". In America, this used to be called Civil Responsibility or "Civics"--to contribute to the betterment of the Republic rather than the needs of the Individual's greed and selfishness which IS the root of the "Big Three" melt-down.

Read GMC's 10-K and 10Q Accounting Sheets and see for yourself...........overpaid Executive Compensations...........Advertising and Marketing "Write-Offs" (Tax Evasion/Pre-Tax Expenses) and other "Write-offs" created the loss of Capital Reserves. Simply put.............a FEW lived as Kings while the MANY lived as "Peasants"--the three-tiers of European Aristocracy for which our Framers declared our sovereignty from King George III. Academia therefore, simply destroyed American Exceptionalism--not the UAW.

[iambusto]

NEVER BUY from a company that has UNIONS !!

[Egalitare]

That excludes about 90% of the Defense Industry.

[mars4]

NO BAILOUTS FOR THE AUTO INDUSTRY! NO MORE BAILOUTS! It is bad enough bailing out the banks, but in that the government is bailing out an industry that all other industries need, credit. The government is getting stocks that may be worth more in the future. Whatever, that is over. Once we start down the path of bailing out the auto industry there will be no end to it, and these are low interest "loans." No one has confidence in these companies to loan them money. The airline industry will be next. On what criteria will bailing out be based? Size? The big 3 auto makers last year employed only 240,000. They also pay for a "Job Bank" program where over 12,000 employees are fully paid to do nothing. Each of these non working employees costs $120,000 per year, which comes to over one billion dollars. It is because of waste like this that brings the auto companies to us with hat in hand, and there is no sign of changing things. Below is a link about the "Job Bank" program:
http://www.detnews.com/2005/autosinsider/0510/17/A01-351179.htm

[anonimost]

they crush the competition,block any start ups who are trying to do appropriate cars and loosely define what is "fuel efficient" to get by with the same old same old. f u c k them.

you wanna dole out money? pay the salaries and benefits of the laid off autoworkers until they can be transitioned into new work. but get that work rolling right away. you must have more of a skill set than ONLY being able to work on cars. how about metro rail cars?

[kstuff]

The automakers going under cannot be equated with the loss of Starbucks or Circut City. Those are individual companies. A more accurate metaphor would be:

no government loan for all american companies associated with coffee=the closure of all companies or places where coffee is served, coffee is sold, coffee is consumed, coffee is distributed, etc.

Hence, the closure of all or most restaurants, grocery chains, coffee shops, bookstores, shopping malls, food packaging plants, etc. That's the scale that were talking about. The loss of 3 million jobs, the loss of tax revenue, the loss of health insurance, all on a grand scale.

[rpahk]

You are assuming a chapter 7 liquidation. A chapter 10 reorganization would result in fewer job losses and the employees who remain could be working for a solvent company if the chapter 11 reorg was successful.

Good article on NYT about the UK experience with British Leyland. Government bailed out British Leyland only to have the company go broke a few years later. The lesson learned is bailing out a structurally broken company only delays the inevitable and GM falls into the category of structurally broken.

[Emjay12]

Automakers Bailout:

I have been mulling over a good solution to the big three automakers needing a bailout.

Competition leads to innovation, better products, and a larger selection. Competition is what capitalism thrives on. My solution is to break up these three mammoth corporations into smaller ones and then giving these new smaller companies bailout money. If GM were split up: Buick, Chevy, Cadillac, GMC, Pontiac, Hummer, Saturn, and Saab would all have their own management, new leadership, and could thrive or starve individually from one another. Also if one fails the nation won't be in jeopardy. We need to split up all three auto-making giants. Let capitalism weed out the weak. And, by having these smaller automakers as competition, new start-up automakers (green and electric automakers) could stand a chance at entering the market.

I hope this is helpful. I believe it is a good idea. Whether or not it is possible is very debatable. But AT&T was split up and its factions became very successful. God bless

[metalpipe]

Competition and the economic ups and downs over the past 30 years have 'weeded out the weak'. That's why the big three exist.

Next idea.

[kstuff]

LittlePurple,

I don't understand how you can say that the auto companies "aren't hurting as much as the banks." The success of the auto companies depends upon banks giving loans to buyers. If there are no banks, there are no consumers. Both industries are in trouble.

[anonimost]

who in their right mind would buy a car now anyway? huh? who, who? you?... okay, i'm a little tipsy.

[PhilipTaylor]

If the Republicans will not cooperate, then to get the Big 3 to the end of the Bush ERA why not use the $25 Billion approved for Green conversion.

Then the NEW Congress and Obama can pass a NEW Improved Auto Bailout in January for the other $25 Billion!

Why fight the Senate Republicans as they will not help! Many are southern Republicans who are protecting Toyota and others who build cars in their states!

[anonimost]

25 bil will never be enough for a green conversion because these 3 have done everything they can to block changing to genuine fuel efficient cars.

take care of laid off autoworkers with the money and let the whole thing go down.