A $15bn Detroit Three bailout deal finally agreed between the Bush White House and congressional Democrats last night is headed for a House of Representatives vote later today (10 December) and likely to be passed up to the Senate by a narrow margin.
Some details are likely to be further haggled over during the House debate and the automakers will have to submit to a yet-to-be-appointed federal ‘car czar’ who will oversee their restructuring.
The bailout would allow GM and Chrysler to avoide threatened bankruptcy to the end of March with short-term loans, Reuters reported. Ford, in a better cash position, has not asked for immediate help but would like a $9bn line of credit in case its situation worsens.
It had been agreed earlier that the $15bn would come from an Energy Department fund established last September to help Detroit make more fuel-efficient cars. This had been opposed by pro-environment groups.
A Bush administration official told the news agency the negotiators satisfied a key White House concern that companies receiving aid obtain the necessary concessions and make other changes to prove they can survive and compete.
The move would also make the government the automakers’ biggest shareholder.
The car czar would have power to direct restructuring and withhold more loans if progress isn’t made. Critically, the czar could also recommend bankruptcy restructuring if companies borrowing money fail to obtain the necessary concessions.
Reuters said some Republicans wanted a bankruptcy option included as an incentive for labour and other stakeholders to agree on concessions.
And The White House is still against the Democrats’ bid to force automakers to drop lawsuits against California and other states seeking to cut vehicle emissions and other greenhouse gases. According to Reuters, the administration official expected the bill would not succeed unless that provision is removed.
Republicans are also concerned over the use of taxpayer money to help Chrysler, which is owned by private equity firm Cerberus Capital Management, the news agency said. The administration reportedly resisted a bid to hold Cerberus liable for repayment if Chrysler defaults on any loan.
It was not clear this morning if that issue still needed clarification.
Reuters said Democrats should be able to get the bill past the House as they control Congress but it was possible Republicans could stop a measure in the Senate with a procedural roadblock that requires 60 votes to clear.
“Ball is in the Senate Republicans’ court,” a spokesman for Democrat Senate majority leader Harry Reid told Reuters. “There is no word yet whether they will give us consent.”
The spokesman for Republican senate minority leader Mitch McConnell said he would not comment until he had seen the bill.
Former House Speaker and Republican Newt Gingrich predicted Congress would narrowly pass the package despite divisions in the Republican Party over the bailout, Dow Jones said.
“If I were betting, it will pass with a very large ‘no’ vote,” Gingrich told the news agency.
He reportedly called the proposed bailout a “terrible idea,” saying a bankruptcy court would be the proper authority to restructure the industry, not Congress.
“Why would you want the union leadership, which has clearly failed, and corporate leadership, which has clearly failed, to get $15bn?” asked Gingrich, who, Dow Jones noted, supported a government bailout of the Wall Street financial industry in the autumn.
He said a survey by his website American Solutions showed that 91% of nearly 73,000 respondents favoured a Chapter 11 bankruptcy filing by the automakers over a government bailout but predicted that some conservatives in Congress would vote for a bailout because of pressure from auto manufacturers and dealers in their home states.