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Auto Bailout Clears House but Faces Hurdles in Senate
Many in GOP Doubt Aid Will Save Detroit

By Lori Montgomery and Paul Kane
Washington Post Staff Writers
Thursday, December 11, 2008

The House last night approved an emergency plan to prevent the collapse of the nation's domestic automobile industry, but the measure faces serious opposition in the Senate, where Republicans are revolting against a White House-brokered deal to speed $14 billion to cash-starved General Motors and Chrysler.

After battling through the weekend to reach a compromise with congressional Democrats, the White House yesterday dispatched Chief of Staff Joshua Bolten to sell the plan to restive Republican senators. But many GOP lawmakers emerged from a combative luncheon with Bolten unconvinced the plan would compel Detroit automakers to make the painful changes necessary to restore them to profitability.

After mostly partisan debate, the House voted 237 to 170 to approve the measure. But with Sen. Richard C. Shelby (R-Ala.) and other conservatives threatening to block consideration of the measure, even some Republican advocates of the bailout said it is unlikely to attract sufficient GOP support to win approval in the closely divided Senate.

"I don't think the votes are there on our side of the aisle," said Sen. George V. Voinovich (R-Ohio), a stalwart champion of the auto industry. "Some effort needs to be made to respond the concerns of my colleagues."

At the heart of the conflict is a debate over how to best help the car companies not only survive the deepening recession but rid themselves of a legacy of debt, high production costs and plush worker benefits that have left them unable to compete with their more nimble foreign competitors. GM, Chrysler and Ford have already moved to streamline costs; along with the UAW, they have offered to make additional concessions. But many Republicans think the automakers' problems could be more efficiently resolved by a bankruptcy court with legal power to dissolve existing contracts than by a government "car czar" whose actions could be swayed by Washington politics.

"Instead of the car czar, this ought to be titled the president's puppet," complained Sen. Bob Corker (R-Tenn.), echoing the concerns of many of his GOP colleagues. Corker yesterday unveiled an alternate proposal that would force bondholders in the car companies to accept equity as partial payment; force the UAW to immediately reduce worker pay packages to match Nissan, Toyota and Honda; and ban compensation to idled workers, among other provisions.

"If we don't have the forced restructuring plans in place, many of us don't believe that American car companies will come out of this in a competitive position and the taxpayers' money will be wasted," said Sen. John Ensign (R-Nev.).

Ensign added that he fears a car czar would not have the expertise to deal with the auto companies. "When GM, Ford, Chrysler, their management teams have not been able to run their companies, obviously, very well, how does anybody expect some car czar or some politician to be able to make the decisions that are right from a business standpoint?"

Democrats have resisted forced restructuring, arguing that, under the Bush administration it could amount to open season on the UAW. They also sympathize with the automakers' argument that bankruptcy proceedings would scare off potential buyers.

"People buying cars want to know that they'll continue to have a relationship with an entity that can service the cars," House Financial Services Committee Chairman Barney Frank (D-Mass.), the chief House negotiator on the package, said during House debate.

Frank added: "The greatest illogic is to argue that somehow in the bankruptcy courts . . . you have a far greater degree of expertise than either" Bush or President-elect Barack Obama, with their teams of economists, could muster.

White House Deputy Chief of Staff Joel Kaplan defended the measure, saying "we think we've come up with the right solution." Kaplan, one of the chief negotiators for the White House, said President Bush would personally lobby senators in the coming days.

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.

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