By Joseph J. Schatz CQ Staff
Published: 12-09-08
Close to striking a $15 billion deal with the White House Democratic leaders prepared to sell an automobile industry rescue plan to skeptical members of both parties in hopes of sending the president a bill by week’s end.
Republican leaders have yet to weigh in on the emerging plan adding to the uncertainty of the outcome if as expected it hits the floor in coming days.
The compromise would tide over the U.S. auto industry — mainly struggling General Motors Corp. and Chrysler LLC — until early next year under tight government oversight including a provision that would enable the government to demand early repayment of the loans if the firms were not making adequate progress toward reinventing themselves.
The deal had not been finalized Monday night as negotiators tussled over financing and oversight details. White House spokeswoman Dana Perino said Monday that “one thing we want to make sure is that the legislation does not weaken the requirement that any long-term financing only be made available to firms that have a credible viability plan.”
House Speaker Nancy Pelosi D-Calif. said that under the Democratic proposal no further financing would have to be given to the auto companies if the administration was not happy with their plans.
“The bill shows a path we can move forward on and I am cautiously optimistic that we will reach an agreement that can get the necessary votes in the Congress” Sen. Carl Levin D-Mich. a key auto industry ally said in a statement Monday.
If a final deal is struck it remained unclear late Monday whether the House or Senate would move first on the legislation though no Senate vote was expected earlier than Wednesday a Senate leadership aide said.
“There is an overwhelming likelihood that a bill will be on the president’s desk by the end of the week” said House Financial Services Chairman Barney Frank D-Mass.
GOP Uncertainty
Congressional and White House negotiators including chief administration lobbyist Dan Meyer continued to hammer out final details of the plan late Monday. But it was clear that the compromise would set the stage for a broader government-supervised restructuring of the industry next year under President-elect Barack Obama . By March 31 2009 GM Chrysler and Ford Motor Co. would have to submit detailed plans for overhauling their businesses or the loans could be recalled Senate Majority Leader Harry Reid D-Nev. said.
Despite containing numerous oversight provisions — which would be enforced by either a single administrator or a board of presidential appointees — it remained unclear late Monday whether the plan would satisfy the concerns of Senate Republicans some of whose support will be needed to reach the 60-vote threshold to clear procedural obstacles. While Republicans from states with a significant domestic auto presence — like Ohio and Missouri — are expected to back the deal other conservatives and those from states with foreign auto plants have voiced concerns or outright opposition to any bailout.
“At first glance it appears to be weak and lacking the benchmarks we believe are necessary to put these companies on a viable” path Sen. Bob Corker R-Tenn. said in a statement about the Democratic plan Monday. He said the loan program should require more concessions from automakers and the United Auto Workers union alike such as forcing the industry to bring its wages close to those paid domestically by foreign firms.
Sen. Judd Gregg R-N.H. said “To protect taxpayers I remain concerned about committing federal dollars for the Big Three without any clear strategy that the money will be put to good use and repaid. . . . It is critical that we fully understand the budgetary impact of the latest proposal before we hand out billions of taxpayer dollars.”
Senate Minority Leader Mitch McConnell R-Ky. said the GOP would insist that the legislation require the Big Three to agree to “significant and fundamental reform.”
‘Car Czar’
The bill is expected to allow seven-year loans to the automakers at a 5 percent interest rate for the first five years and 9 percent thereafter. Lawmakers were considering a provision that would force firms taking the loans to submit every proposed transaction involving more than $25 million for government approval for the duration of the loans. However that provision designed to prevent the automakers from using federal money to move operations overseas has drawn concerns from the White House Frank said.
The legislation would allow the president to choose whether to appoint a single administrator — referred to as a “car czar” — or a board of Cabinet officials to oversee the loan program Frank said. That flexibility is aimed at giving maneuvering room to Obama who will bear longer-term responsibility for an auto loan program and is weighing in on the talks.
Frank likened the oversight structure to a “holding operation” since whoever President Bush would appoint to oversee the emergency loans would probably be in office only until late January. Frank predicted that given the brief transition time remaining Bush would probably put an administration official with an existing staff in charge of the loans in the interim.
Levin said a “number of provisions that would have created great problems were not included such as a czar who could dictate the operations of the companies; mandated changes in management; or a march toward bankruptcy.”
However the oversight official or officials would be empowered to negotiate with creditors unions and other stakeholders in the restructuring process.
Business leaders urged Congress to act on a loan package this week but also expressed concerns about the emerging plan including the proposed oversight board.
In a statement Monday U.S. Chamber of Commerce President Thomas J. Donohue said Congress should not “give control of three competing car companies to an oversight board of inexperienced members.”
As with the $700 billion financial industry bailout (PL 110-343) enacted earlier this year the companies accessing loans will face restrictions on executive compensation and “golden parachutes” that reward outgoing bosses. The government would also receive warrants in the firms participating in the programs.
The auto funds will come from an existing Energy Department loan program (PL 110-140) the source preferred by the White House and reluctantly embraced by Pelosi late last week in a shift that sparked a weekend of staff-level negotiations.
At Pelosi’s behest the package may include a provision prohibiting the Big Three from using the federal loan money to oppose state fuel emissions rules though the provision remained a point of contention Monday night. Pelosi also demanded that the money for the Energy Department program originally established to help Detroit comply with new fuel efficiency standards be replenished early next year probably in an expected economic stimulus bill.
While GM requested a total of $18 billion in loans and credit in its latest presentation it said it needs an immediate $4 billion loan to stay solvent through Dec. 31 and $6 billion more to keep operating through March. Chrysler said it needs $7 billion by the end of the year to avoid bankruptcy.
Though Ford requested access to a total of $9 billion in long-term loans it said it might not need any of that money unless conditions worsen or its competitors go under.
Alan K. Ota contributed to this story.
