By Lori Montgomery
Washington Post Staff Writer
Monday, December 8, 2008
Congressional Democrats are drafting legislation that would give the teetering Detroit automakers at least $15 billion in emergency loans early next week and grant the federal government broad authority to manage a massive restructuring of their operations.
The proposal, which could be put to a vote in Congress as soon as tomorrow, would establish a seven-member "auto board" of Cabinet officials and a chairman to be appointed by President Bush to oversee both the short-term loans and a long-term effort to restore the faltering industry to profitability. If the companies take the cash, they would be accountable to the government for nearly every move, and for every transaction of $25 million or more.
As part of that restructuring, General Motors, Chrysler and Ford could be asked to jettison their top executives, one of the chief architects of the plan, Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.), said yesterday. Stating bluntly that "GM is in the worst shape" of the three auto giants, Dodd said that GM chairman G. Richard Wagoner Jr., the company's chief since 2000, "has to move on."
"You have got to consider new leadership," Dodd said on CBS's "Face the Nation." "If you're going to really restructure this, you have got to bring in a new team to do this."
President-elect Barack Obama seemed to echo that view during an appearance on NBC's "Meet the Press" yesterday, saying "we have to put an end to . . . the head-in-the-sand approach to the auto industry that has been prevalent for decades now."
Obama expanded on the point later at a news conference in Chicago, saying management should be replaced if the "team that's currently in place doesn't understand the urgency of the situation and is not willing to make the tough choices and adapt to these new circumstances."
The president-elect also for the first time publicly endorsed the idea of a short-term loan program to keep GM and Chrysler afloat through the first three months of the new year. Ford is also seeking access to a government line of credit but says it would only ask for the money if the economy weakens significantly. By contrast, GM executives have said that, without government help, they could run out of cash within the month.
On Friday, Democrats in Congress broke a weeks-long stalemate with the White House over aid to the automakers, agreeing to draw funds from an existing loan program created by Congress to promote fuel-efficient technologies, as the White House had long proposed. Since then, the two sides have worked through the weekend to reach a compromise, but they have yet to agree on many details.
A White House official declined late yesterday to comment on the Democratic proposal, saying it has not been transmitted to the White House or to congressional Republicans. The Bush administration has drafted its own proposal for managing the bailout, including appointment of a "financial viability advisor" within the Commerce Department who would have vast power to force the car companies into bankruptcy unless their executives, their workers and their creditors make concessions.
As described by Democratic aides, the Democratic proposal stops short of that model, treating the auto giants more like the banks and other financial institutions that have sought help under the $700 billion financial rescue program administered by the Treasury Department.
Under the Democrats' proposal, the Detroit Three would be eligible for low-interest loans to be disbursed by the Treasury on Dec. 15. The seven-year loans would carry a 5 percent interest rate for the first five years, and 9 percent thereafter -- the same terms offered to financial firms under the Treasury program.
As long as the loans are outstanding, the auto companies would be barred from paying dividends to their shareholders or bonuses to their top executives. And they would be required to submit a long-term restructuring plan to the auto board by March 31.
The board would be composed of the heads of six Cabinet agencies -- including Treasury, Energy, Labor, Commerce, Transportation and the Environmental Protection Agency -- plus a chairman to be appointed by the president.
Though Bush would have the opportunity to establish the board, his administration would have little chance to exercise its power. Under the Democratic proposal, the board would develop broad restructuring goals for the companies, but it could not compel them to act. The board also would be prohibited from revoking the short-term loans to the auto companies until February, when the board would be in the hands of Obama appointees.
It was unclear yesterday how the legislation would address one of House Speaker Nancy Pelosi's (D-Calif.) top priorities: replenishing the loan fund, which was created to help retool factories to produce more fuel-efficient cars.
The proposal also does not mention changing the companies' leadership, aides said. Reacting to Dodd's suggestion to oust Wagoner, GM spokesman Steve Harris said "the employees, dealers, suppliers and the GM board of directors feels strongly that Rick Wagoner is the right guy and best guy to lead us through these tough times."
Democratic leaders hope to bring their plan up for a vote this week, when lawmakers return to Washington for a special session. Dodd said he is optimistic that it would win congressional approval, despite distaste among lawmakers in both parties for the idea of pouring taxpayer dollars into companies on the brink of failure.
"Even people who don't like this idea, none of us want to wake up on January 1 and discover we don't have an industry to save," Dodd said.
Others were less sanguine. Richard C. Shelby (Ala.), the senior Republican on the Senate Banking Committee and a staunch opponent of government aid for the car companies, derided the developing plan as "a bridge loan to nowhere." Speaking on "Fox News Sunday," Shelby said he may filibuster the proposal in the Senate, a move that would effectively kill it.
Asked whether Democrats have the votes to approve an auto bailout, Sen. Carl M. Levin (D-Mich.) called that "a complicated question."
Staff writer Kendra Marr contributed to this report.