Tense talks are continuing on a bill to provide financial aid to the auto industry as the White House pushes tougher consequences than congressional Democrats embrace for failure by the carmakers to bring costs under control.
The Bush administration would allow a “car czar” envisioned in the legislation to force the companies into bankruptcy if they weren’t doing enough to cut labor costs, restructure their debt and downsize to stay afloat.
At the same time, the head of the United Auto Workers, Ron Gettelfinger, signaled that his union might demand an equity stake in General Motors Corp., if asked to give up more.
The fast-paced developments come amid an environment of general economic instability, the Congress and the presidency both in transition, a ricocheting Wall Street and the Federal Reserve Board, Treasury and other agencies fighting to steady the reeling financial industry.
House Speaker Nancy Pelosi said she supports the concept of a federal overseer of any rescue plan, saying she lacked confidence the heads of the car companies could solve the problem if “left to their own devices.”
Pelosi appeared on morning television Tuesday after a night of intense Capitol Hill discussions aimed at narrowing the differences over a $15 billion bill that would, among other things, rush short-term loans to the industry. The plan would require that the Big Three reinvent itself to survive — and that it pay back the government if it doesn’t. The package could come to a vote as early as Wednesday.
Pelosi said she thought taxpayers should consider it “a second chance” rather than a bailout.
Deputy White House press secretary Tony Fratto said Tuesday, “We made progress and hope to continue making progress. We want to move quickly, but it’s important that we get the policy right.”
Cash from any such rescue plan would immediately be plowed into General Motors Corp. and Chrsyler LLC. Ford Motor Co. has said that it does not have an emergency cash-flow problem and that it would not ask for short-term assistance.
In testimony before Congress last week, General Motors and Chrysler, which have said they are weeks from collapse, made it clear they would need a total of $14 billion to $15 billion to survive through early 2009.
“We do not face a near-term liquidity issue, and we will not be seeking a short term bridge loan,” the company said in a statement Monday night. “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.”
Robert Lutz, GM’s vice president of global product development, also said he could accept a federally appointed czar to supervise implementation of a restructuring plan.
“Well, whether we need it or not, I think it’s reasonable that when the federal government steps in with taxpayer money, they’re not going to–they’re not going to lend us the money and just say, `Do the best you can with it and tell us when you need more.’ Obviously, there’s going to be some kind of oversight and I think that’s a reasonable thing to expect,” he said on CBS’s “The Early Show.”
The measure being discussed in Congress would put a government overseer named by Bush in charge of setting guidelines for an industrywide overhaul, with the power to revoke the loans if the automakers fail to do what’s necessary to become viable. The White House was seeking tougher consequences, including allowing the overseer — being called a car czar — to force the companies into bankruptcy if they weren’t doing enough to cut labor costs, restructure their debt and downsize to stay afloat.
Pelosi said she had no candidates for the job, but said that Paul Volcker, a former Federal Reserve chairman and now an economic adviser to President-elect Barack Obama, would be a good choice. She said he enjoys the public’s confidence.
Despite optimism on both sides that Congress and the White House could reach a swift agreement on the rescue package, it was still a tough sell on Capitol Hill. With lawmakers in both parties bitter over the administration’s use of the $700 billion Wall Street bailout, many of them were preparing to hold their noses and vote for yet another federal rescue to avert deeper economic disaster.
“While we take no satisfaction in loaning taxpayer money to these companies, we know it must be done,” Senate Majority Leader Harry Reid, D-Nev., said. “This is no blank check or blind hope.”
Gettelfinger, who appeared Tuesday on CBS, declined to say whether his union would demand a seat on GM’s board of directors in exchange for contract concessions. But he did say that “if we’re gonna be asked to give up more, and it appears that we are, then we should have an equity stake in the company.”
The developing plan would dole out auto industry loans right away, drawing the money from an existing program meant to help the carmakers retool their factories to produce more fuel-efficient vehicles. Then the czar would write guidelines, due on the first of the year, for restructuring the companies.
The proposal would attach an array of conditions to the auto bailout money, including some of the same restrictions imposed on banks as part of the Wall Street rescue. Among them are limits on executive compensation, a prohibition on paying dividends, and requirements that the government share in future profits and taxpayers be repaid before any other shareholders.
The proposal gives the car czar say-so over any major business decisions by the automakers while they’re taking advantage of federal aid. The companies would have to open their books to the government, including informing the overseer of any transaction of $25 million or more.
Also under discussion is a requirement that the carmakers taking federal aid get rid of their corporate jets — which became a potent symbol of the industry’s ineptitude when the Big Three CEOs used them for their initial trips to Washington to plead before Congress for government assistance.
Still, the White House wanted clearer consequences for the automakers if a company was not meeting its own promises for long-term viability, according to officials who would comment on the continuing negotiations only on condition of anonymity.
Under Democrat’s proposal, if the Big Three didn’t come up with suitable restructuring plans by the end of March, the czar would have to submit his own blueprint to Congress for a government-mandated overhaul.
Sen. Carl Levin, D-Mich., a key ally of the auto industry, said getting the roughly 15 Republicans needed to support the plan was an uphill battle.
“This is a real hill to climb even if we can get agreement between the White House and congressional leaders,” he said.