Posted on December 11, 2008
http://www.nytimes.com/2008/12/11/business/11auto.html?ref=usThe House voted on Wednesday to approve a $14 billion government rescue of the American automobile industry, but the bailout plan, which would provide emergency loans to General Motors and Chrysler, was in jeopardy because of strong Republican opposition in the Senate. Without immediate federal assistance, G.M. would be in danger of not paying its suppliers, employees and creditors, and could miss interest payments on its outstanding debt. Failure to pay creditors, for example, could result in legal actions leading to a forced bankruptcy filing.
“I wouldn’t like to speculate what would unfold, but suffice it to say the survival of the company as we know it would be highly questionable if we don’t get some bridge loan,” G.M.’s vice chairman, Robert Lutz, said in an interview on Monday.
The bill would also give the government warrants to take an equity stake in the automakers. It would limit executive pay, bar golden-parachute severance packages and prohibit the paying of shareholder dividends while the emergency government loans were outstanding.
The bill would require the companies and their stakeholders, including creditors, labor unions and dealers to agree on sweeping reorganization plans that would lead to long-term financial viability. If they failed to agree, the auto czar would be able to impose a plan, and could also force the companies into bankruptcy if they failed to meet requirements.
The plan seeks to save the auto industry from what one senior White House official called “30 years of slow suicide.
The House approved the rescue plan by 237 to 170, mostly along party lines, with 32 Republicans mainly from states heavily dependent on the auto industry joining 205 Democrats in supporting the measure. Voting against were 150 Republicans and 20 Democrats.
The White House so far has failed to generate support among Senate Republicans, who have the power to kill the bill. Some Republican senators said the automakers should be allowed to fail. Others said the proposed oversight of the rescue by a so-called car czar was too weak.
Senator Richard C. Shelby of Alabama, the senior Republican on the banking committee, called the proposal “a travesty” and said that he would filibuster the bill. “This is an installment on a huge bailout that will come later,” he said.
Senator Bob Corker, Republican of Tennessee, who was working to draft alternative legislation, said the proposal put forward by the White House and Congressional Democrats provided only weak authority for the car czar, who would supervise the sweeping reorganization plans that the automakers have agreed to carry out.
“I have a banking staffer who can carry out the responsibilities of this so-called czar,” Mr. Corker said. “I mean it’s a liaison. This person has no power.”
“I didn’t see anybody in the group who is willing to blink,” he told reporters. An aide to the Senate majority leader, Harry Reid of Nevada, said the Democrats were trying to negotiate a deal with Mr. McConnell under which there would be several votes on measures intended to aid the auto industry including, perhaps, alternative proposals by Mr. Corker or other Republicans.
Some Congressional Democrats speculated that if Senate Republicans were kill the rescue plan, the Treasury secretary, Henry M. Paulson, Jr., would have no choice but to keep G.M. and Chrysler afloat, at least until the new Congress begins early next month and wider Democratic majorities are sworn into office.