Senate will debate $25 billion auto bailout on Monday

11/14/2008

WASHINGTON Struggling to keep alive a government bailout of the troubled auto industry, key supporters offered concessions Friday including reducing its $25 billion size. The White House came out firmly against a Democratic plan to carve it out of a $700 billion rescue package for financial companies.

The measure gained important ground among Republicans on Capitol Hill, where at least a dozen to 15 GOP votes in the Senate will be needed to prevent opponents from blocking it in the Senate. The focal vote on that could occur as early as next Wednesday.

U.S. Sen. Kit Bond of Missouri became the second Republican to publicly voice support for the idea, joining Sen. George Voinovich of Ohio. Both states have major auto plants. Several other GOP senators signaled they might accept a rescue for Detroit s Big Three if it contained strict conditions for the beleaguered companies, including management and salary changes, concessions from their powerful unions, and a commitment to making more fuel-efficient vehicles.

Alan Reuther, the United Auto Workers union s legislative director, said one option under consideration was a smaller, more targeted amount of funding that would get the companies through to March. He said the union was open to discussing various options like that. There s a need for immediate action.

Sen. Debbie Stabenow (D., Mich.) said negotiations were taking place on how much to trim the package. We re still at this point talking to colleagues to see what the support is there for, she said. This is about getting enough votes to be able to solve the problem.

General Motors Corp., Ford Motor Co., and Chrysler LLC have been clamoring for such aid as their industry is battered by the economic meltdown, which has choked off sales and frozen credit. GM has said it might not survive through year s end without a government lifeline.

The White House s rejection of using any of the $700 billion designated for the financial meltdown sets up what could be the last showdown between President George W. Bush and the Democratic Congress. Democrats are choosing a path that would only lead to partisan gridlock, White House press secretary Dana Perino told the Associated Press.

Perino said the administration would rather Congress speed the release of a separate $25 billion loan package for the carmakers, which was approved in September to help them meet tougher fuel-efficiency rules. Environmentalists and House Speaker Nancy Pelosi have vehemently opposed using that money for anything other than designing and building vehicles that get higher gas mileage and produce less pollution.

Defying Mr. Bush, U.S. Sen. Harry Reid (D., Nev.) said he would hold a vote next week on the measure, attaching the auto help to a $6 billion bill to extend jobless aid to unemployed workers whose benefits are expiring.

Behind the scenes, proponents scrounged for more support among Republicans from states with heavy concentrations of auto manufacturers and suppliers, and worked to allay concerns among lawmakers in both parties about supporting yet another bailout so soon after the unpopular financial industry rescue.

A handful of other GOP senators have said they are open to the measure.

U.S. Sen. Charles E. Grassley (R., Iowa) said in a letter to Senator Reid and Congressman Pelosi that any bailout should include restrictions on executive salaries, compensation packages, and excessive internal spending, along with commitments from the carmakers to develop more fuel-efficient vehicles.

Sen. Richard Lugar (R., Indiana) said through a spokesman that he would review the proposal, noting that he had backed a similar program for Chrysler in 1979 only with taxpayer protections and serious concessions from the company, its dealers and the United Auto Workers.

U.S. Sen. Arlen Specter (R., Pa.) told The Morning Call of Allentown, Pa., that he was prepared to consider it, but wanted answers on whether the situation is so precarious that it would take more than what is proposed to save the auto companies.

Senator Bond, a conservative, said he was putting aside his distaste for federal intervention in the interest of his constituents.

The idea of the government getting involved in the free market is very troublesome and potentially dangerous to the health of our system, but we have to act in unique times of crisis when tens of thousands of Missouri workers are in danger of losing their jobs, he said in a statement.

Democrats too are demanding strict limits on any auto rescue. President-elect Barack Obama wants new government oversight of the Big Three included in the package, possibly with creation of an auto czar or independent board modeled on the government s rescue of Chrysler in 1979, according to an aide. The person spoke on condition of anonymity because the discussions are private.

U.S. Sen. Tim Johnson (D., S.D.), an opponent of the financial industry bailout, said he was concerned about the auto rescue measure and wanted to ensure it wouldn t put taxpayers at risk. U.S. Sen. Tom Harkin (D., Iowa) said any such aid should ensure that taxpayers are repaid, include requirements that the auto firms develop alternative vehicles, eliminate their ability to pay dividends, and slap tight limits on their executives salaries.

Senate Republican Leader Mitch McConnell has not taken a public position on the plan. He issued a statement Friday saying he wouldn t comment on it until he had seen a copy of the still-unwritten bill.

It would be a real challenge to promise any level of support or opposition sight unseen, said Mr. McConnell, who has GM and Ford plants his state. We owe it to the people of Nevada, Kentucky, and all across America to make known the impact this bailout would have on the deficit; the taxpayers deserve to know if this bailout would increase the national debt and raise their taxes.

Senator McConnell backs the White House alternative of using the separate $25 billion in already approved fuel-efficiency loans to address the automakers current woes.

Democrats are reluctant to do so, because it would mean removing restrictions on the money backed by environmental and consumer groups. Environmental groups, a key Democratic constituency, insist that any aid for the auto industry be tied to compliance with stricter clean-air rules and better fuel economy for their products.

Removing those limits from the $25 billion loan package approved in September would be a huge bait and switch, said Ann Mesnikoff, director of the clean cars campaign at the Sierra Club.

The Democrats carmaker aid plan would provide for the government to hold some kind of ownership stake in the companies for the duration of the loan to ensure that taxpayers shared in any gain and would ultimately be reimbursed.

Democrats would have no problem passing the bill in the House, where they have a much larger majority than the narrow 50-49 one they will have in the Senate once Senator Obama resigns on Sunday. Speaker Pelosi has been reluctant to convene a formal session until she is sure the measure will pass the Senate.

Lawmakers in both houses will be in Washington next week to reorganize their leadership teams and committee assignments for the 111th Congress that will convene on Jan. 3.

Also slated for next week are hearings on the auto bailout that could help determine its fate. The Senate Banking Committee plans a session on Tuesday and the House Financial Services panel will hear Wednesday from the Big Three auto executives and the United Auto Workers.