Aid prospects darken for US carmakers

WASHINGTON - November 17, 2008 - 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.

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.

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