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Auto Bailout Clears House but Faces Hurdles in Senate
House Speaker Nancy Pelosi (D-Calif.) planned last night to send lawmakers home for the holidays but left open the possibility of calling them back before the new Congress convenes next month. A senior House aide said Democratic leaders have no intention of doing so, however.
The move increases pressure on the Senate to approve the House-passed bill without changes -- or risk forcing some of the nation's largest manufacturers into bankruptcy by rejecting it.
"Many Republicans and Democrats agree that a disorderly bankruptcy could be fatal to U.S. automakers and have devastating impacts on jobs, families and our economy," White House press secretary Dana Perino said in a statement last night. "We believe the legislation developed in recent days is an effective and responsible approach to deal with troubled automakers and ensure the necessary restructuring occurs."
GM issued a statement thanking the House for its support: "We encourage the Senate to act soon so that we can continue at full speed on the restructuring and advanced technologies plans that will form a stronger, more viable GM."
The measure would speed up to $14 billion in emergency loans to the Detroit automakers, enough to keep GM and Chrysler in business through the end of March. Ford has also requested access to a federal line of credit but has said it does not expect to need any money immediately.
Lawmakers had hoped to provide $15 billion for the Detroit automakers from a loan program created this fall to fund the development of fuel-efficient technologies. But in recent days, they decided to set aside some money so smaller companies could use the loan program for its original purpose.
In exchange for the cash, the automakers would be required to give the government warrants for stock worth 20 percent of the value of the loans. In the case of Chrysler, which is owned by the private-equity firm Cerberus Capital Management, the government would take warrants from Cerberus. The companies also would be required to submit to the authority of a car czar, who would seek to "facilitate an agreement" for long-term viability in talks with the car companies and their employees, retirees, unions, creditors, suppliers, dealers and shareholders.
Bush would have to appoint the czar within days. Kaplan said administration officials have been in talks with Obama about that appointment, raising the possibility that a compromise candidate might be named.
If the talks failed to produce a plan to cut costs and achieve financial viability by March 31, the car czar would be required to revoke the loans and submit a new restructuring plan that could include the option of Chapter 11 bankruptcy protection. If a company failed to progress toward those goals, it would be barred from receiving additional government assistance.
The measure contains a variety of taxpayer protections, including audits of the car companies by the Government Accountability Office and government veto power over transactions worth more than $100 million, a provision intended to block investment overseas. The companies also would be barred from paying dividends to shareholders or bonuses to their top executives while the loans were outstanding. And they would be required to sell their corporate jets -- assets that had left a bad impression on lawmakers when the auto executives flew separately from Detroit to Washington last month to beg for government help.
Among the goals set by the House bill is a requirement that the companies comply with "applicable fuel efficiency and emissions requirements," a subtle change that alarmed Senate leaders. They said it could force the automakers to meet strict standards approved by California, the District and 13 other states to reduce greenhouse gas emissions by 30 percent by 2016. Senate leaders drafted their own version of the bill that would require the car companies to comply only with "federal standards," which require cars to average 35 mpg by 2020.
While most lawmakers were focused intently on the $14 billion headed to Detroit, others had lingering concerns about the $700 billion rescue package they approved to help banks unfreeze credit markets in October. Last night, Rep. Steven C. LaTourette (R-Ohio) offered an amendment to require banks that receive cash from the Treasury Department's bailout to account for the money and show that they have increased lending to consumers and businesses, or explain why they haven't.
It passed overwhelmingly, 403 to nothing.
Staff writer Kendra Marr contributed to this report.