Lawmakers returned to the floor of the House on Wednesday to vote on the $14 billion bailout for the nation's imperiled auto industry. (J. Scott Applewhite/AP)
Auto bailout clears House; bigger hurdle ahead
In the Senate, many Republicans resist $14 billion package, worried that the industry won't repay US loans or become more competitive.
By Gail Russell Chaddock | December 11, 2008 edition
Washington
Citing the risk of massive job loss, the House voted Wednesday to loan US automakers $14 billion in return for a direct government hand in restructuring the ailing industry. But the biggest hurdle to clearing the bailout bill lies ahead in the US Senate, where the 60 votes needed to avoid a filibuster and pass the bill are in doubt.
Although the legislation includes protections for taxpayers and the White House has signed off on it, many Senate Republicans say they’re not convinced that the loans will be repaid or that the plan will produce a more viable domestic auto industry.
“People realize this is an incredibly weak bill. It’s the product of an administration that wants to kick the can down the road and let someone else deal with it, and it has minimal, very minimal, support in our caucus,” said Sen. Bob Corker (R) of Tennessee, after a GOP caucus meeting on the bailout on Wednesday.
While some Republican lawmakers insist that the bill produces too much government intervention in the economy, others caution that it may not provide enough.
“I’m really skeptical that the federal government can appoint somebody who can do a better job of running these businesses than the board of directors and the management of these car companies, but let’s say they can,” says Sen. John Cornyn (R) of Texas. “They still need to have the appropriate powers to restructure the companies in a way to make them competitive and viable in the long run. I don’t think that power and authority have been given.”
The House bill, which passed on a 237-to-170 vote, allows US auto companies to tap bridge loans as early as next week.Over the longer term, it sets up a federal administrator, dubbed a “car czar,” to preside over bargaining among stakeholders - auto companies, unions, suppliers, dealers, and other creditors - on how to cut costs and restructure the industry to be more competitive.
If the parties are not able to come together over a restructuring plan by March 31, then Washington can require immediate repayment of the loan.
“The taxpayers get a return on their investment or are the first in line to be repaid,” said Speaker Nancy Pelosi in a floor speech just before the vote.
As a safeguard to taxpayers, the legislation provides that the government be given nonvoting shares in company stock to ensure that taxpayers benefit from any future growth. Lawmakers also added a requirement that taxpayers be repaid first, even if the company enters bankruptcy.
Companies accepting bridge loans would be barred from paying dividends or bonuses or “golden parachutes” for highly paid employees for the duration of the loan. The bill also mandates the sale of corporate jets.
In a bid to ensure that car companies do not use taxpayer loans to shift more production overseas, the bill also requires management to notify and allow the car czar to disapprove of any asset sale, investment, contract, or commitment of more than $100 million, up from $25 million in the first draft of the bill.
After negotiation with the White House, Democrats dropped a measure that would have banned automakers accepting financial assistance from supporting legal challenges to state laws that impose higher greenhouse gas emission standards than those in federal law.
But the key to the plan is the prospect that Washington can use loans to leverage changes across the domestic auto industry, especially a new commitment to innovation and efficiency.
“Green is gold. Making a commitment to innovation, fuel economy, and better emission standards makes the auto industry in our country more competitive. People will want to buy their cars,” Speaker Pelosi added.
Republican lawmakers opposing the bill insist that $14 billion isn’t enough to leverage those changes.
“This is only a down payment. We had testimony last week by one noted economist [that] it’d be $125 billion. Other people say more,” said Sen. Richard Shelby (R) of Alabama, the top Republican on the Senate Banking, Housing, and Urban Affairs Committee, at a briefing on Wednesday. “Unless Chrysler, Ford, and General Motors become lean and innovative and competitive in the marketplace, this is only delaying their funeral.”
The banking panel released its version of the bill Wednesday, but at time of writing Senate majority leader Harry Reid had not scheduled a vote on the measure.
“This legislation will provide solutions to stabilize our domestic automobile industry so that our economy will not suffer a devastating blow and so that millions of American workers do not find themselves out of a job,” said Sen. Christopher Dodd (D) of Connecticut, who chairs the banking panel.
But the bill faces strong headwinds. Besides many Senate Republicans, most Americans oppose a bailout for US automakers, according to recent polls.
Public opposition was strong, too, to a bailout for Wall Street, when the Senate voted a $700 billion rescue package for the financial services industry on Oct. 1. That law, which passed 74 to 25, was backed by 39 Republicans and 34 Democrats.
But GOP leaders see a difference between bailing out the financial industry then and helping automakers now. The financial system - or credit - is the heart the economy, and without it the whole system breaks down.
“I voted for a financial rescue package that I thought was essential to keep the country functioning,” said Senate Republican leader Mitch McConnell after the caucus meeting on Wednesday. “I was convinced … that it was a once-in-100-years crisis…. That, in my view, is not a precedent for what we’re dealing with this week or may be dealing with in the future.”
GOP lawmakers who support the bill say their colleagues don’t recognize what a blow the bankruptcy of even one of the Detroit automakers would be to the US economy.
“There needs to be a strong hammer and nails to nail down a positive plan for the auto companies to get out of the situation they’re in and get onto the road to profitability,” says Sen. Christopher Bond (R) of Missouri, who co-chairs the Senate Auto Caucus. “We ought to stay here until we get this done.”
Comments
2. Holly201 | 12.11.08
Tell Congress what you think:
http://www.rallycongress.com/no-bailout-for-the-auto-industry/1409/
NO BAILOUT FOR THE AUTO INDUSTRY
Nancy Pelosi, with the help of Barney Frank, wants to bail out yet another failed sector of the economy. It is not government’s role to reward incompetent, overpaid executives pursuing a failed and anachronistic business model. The American auto industry is in trouble because it produces a shoddy, polluting, gas guzzling product at noncompetitive prices driven by trade union benefit packages. It is a waste of taxpayer money to try to shore up an industry that needs to be radically restructured. The Big Three should be allowed to fail and file for reorganization under Chapter 11 of the Bankruptcy Code. They will not cease to exist, but will be restructured under the supervision of the bankruptcy courts. Congress cannot do a better job than the courts. The courts will supervise the reorganization of the industry without being tempted to reward lobbyists, campaign contributors and unions for their political and financial support.
Congress must allow the economy, existing laws and judicial bodies to resolve the Big Three’s financial problems and not throw more taxpayer money away under a hasty and ill conceived bailout.
3. Ace Edwards | 12.11.08
Filibuster the Congress. The auto vote (BAILOUT) has not passed,, ? THE SKY DID NOT FALL!
4. BillW | 12.11.08
Already they’ve attached PORK to this bill, see the end of it. There’s raises for Fed Judges, & money to transit co.
5. Eugene | 12.11.08
Is anyone here want to buy a US car? This is not recently problem. Detroit industry is dead-end, just like any older industries. America needs innovation. That’s how we stand.
6. Norm | 12.11.08
Help me Understand Why Alabama would spend more in tax dollars to buy
Jobs from Automotive Corporations from over sea’s And not want to help
Automakers on American soil. And another thing, Shelby and Corker need to quit telling stories about the UAW workers making 70.00 an hour. This is a flat out lie and un Christian from my book. You dont start lies and mannipulate the media. Shame on them-God Bless
7. Joe | 12.11.08
Why is all the other car companies doing fine. Maybe because the make only 12 vehicles like toyota. 7 or 8 cars a SUV and a Truck. Can somebody tell ford and GMC we dont need 6 different types of SUV’s and 4 different types of trucks.
8. Pat | 12.11.08
The government put absolutely no strings on the bank bailout. Now they have frozen all loans. How are people supposed to buy cars from American auto companies without a loan? Why doesn’t the government pursue taking the money away from the irresponsible financial institutions and give it to the auto industry? Government and financial institutions got us into this economic mess in the first place, but neither are willing to do their part to get us out.
9. Wayne | 12.11.08
I’ve seen the $70 an hour figure in several sources, it includes benefits. I don’t begrudge anybody, including the executives whatever they can earn…as long as it is economically sustainable. In Detroit’s case it obviously isn’t or they would not be in trouble. Trouble they brought upon themselves. If they had built cars that people wanted to buy they could still pay high wages and fly around in corporate jets. But they didn’t. For years they built rattle traps that spent too much time in the repair shop and not enough time on the road. Some improved recently but it wasn’t soon enough.
If the bail out passes, essentially, those people making $70 an hour are going to be getting money from Walmart wage workers.
There are other problems with bailouts. We don’t have the money to do them. They are creating a culture of dependency. If any of the recipients ever does pay back the money the government will treat the repayment as a windfall; rather than paying back the taxpayers, they will spend the money on pork.
I’ve already called my Senators, my Congresswoman is a reliable no on bailouts.
10. Lowell | 12.11.08
How about no bailout for Cerberus who as the private owners of Chrysler have refused to use their own considerable assets to save their company. Haven’t we bailed out enough plutocrats?
11. Michael Douglas | 12.11.08
The big three need to freeze the body styling for five years and pour this 15 billion under the hood to clean up the emissions and improve fuel economy as well as improve the alternate fuel vehicles available.
12. Jim | 12.11.08
Before you start praising the foreign auto industry, you should check out how they make ends meet!! They get financial backing from thier countries, as should we!! We been the only country that hasn’t backed our auto industry, which is why we have so many new plants with foreign car companies popping up all over the us.
13. Yve | 12.11.08
I need a personal bailout - but I’m sol. Only hard work and restructuring my goals will help.
14. Kathy | 12.11.08
They have attached pork to this bill too? They are like children and this needs to stop. Can you do the required work on a bill and stay focused instead of slipping in unrelated items like raises? We the tax payers are all cutting back and living on less but the government spends our money like drunken sailors, no more.
15. Jon | 12.11.08
I second that notion. A lean (fewer options) and green (higher mpg) model lineup is the only way to compete in an industry that is over abundant with choices. The problem is that R&D needs to be a large part of the budget and that takes time. Don’t look for a major change from any of the big three. They will continue to bleed money for many more years. Either way, job cuts are inevitable. Man am I impressed with the innovation of the Honda FCX!
16. Russ | 12.11.08
If we don’t extend a bridge loan to the auto companies here’s what will happen. The next time we face any type of crisis, don’t expect any help from the Midwest. You will have killed them.
17. What America is About | 12.11.08
“We the People, in order to form a more perfect union, do make cars…”
What the … ?
Why does the United States of America have to make cars? We are a nation of free people, and that is enough.
I would like us to keep our identity on the rights of people, and a just society. We will make what we make. After all the United States no longer has manufacturing sectors for many other objects, why is making cars so different and important. What our factories make will be what our factories make. The divine human spark of life flourishes. Maybe the car manufacturers don’t persist. So? As for the economy and jobs, other industries will open up, and many will like their new pursuits and jobs better.
Main point - “We hold these truths to be self evident, that all men are created equal.” Yes - A principles our government and philosophy. “We hold these truths to be self evident, that the United States makes cars.” No - Doesn’t have the same ring to it.
18. Dan | 12.11.08
Let the companies file for bankruptcy, break the unions, and attempt to restructure in a way that would produce a quality product and a reasonable price. The unions have far outlived their usefullness and have driven the big 3 to the brink of failure.
19. Priya | 12.11.08
Oh God! Give them a break!!! U guys won’t say anything when the financial companies get the bailout….and what do they do after the bail out???? Give themselves huge raises, go to the spa, go for a company picnic…no questions raised. Yet for the auto company u will ask them a plan, go through it and drill them on it, put conditions, reduce their asking money to less than half, agree for it to pass in the house…and then the senate says it might not pass it! Wow…U guys surely are brilliant! Did u really have to do all this when in the end u wanted to say a NO????!!!!!Woooooooooow amaaaaazing!!!!
There can be an UP only after the DOWN!
20. Georgeo | 12.11.08
I was watching NFL football on Fox and CBS this past Sunday and seen about six car commercials. Five were for big, crew cab pickup trucks and one was for a SUV. It does not seem that the auto companies are going to make any changes.
21. Sean Shalor | 12.11.08
If we did this in Europe, America would be screaming “protectionism” !
Don’t you just love the tyranny of World Powers ?
22. shannon | 12.11.08
Isn’t it amazing that Senate Republicans have given the current President a blank check for the last 8 years including what was LOST in Iraq ($9 BILLION), and never was recovered conveniently, as well as got no press coverage. They have had no problem giving him money for Wall Street, Wars, and anything else he wanted. Now they act as if they are worried about the American people’s money. What about the spending of the last 8 years? Wasn’t that the Taxpayer’s money too? Will we see that back after the deficit/debt is (if ever) paid back? Conservative when it
23. Mike McA | 12.11.08
The Bailout Bill is absurd. The first line in the body of the bill says it all: “The purpose of this bill is to preserve and protect the United Auto Workers Union….” The bill does nothing to help the BIG-3 to restructure and shed its current problems, but does miles to tie them with additional baggage that will force them into liquidation.
Princess Pelosi and Bumbling Barney would do the American taxpayers a great favor by letting the companies go into Chapter 11 Bankruptcy.
24. DM | 12.11.08
I’ll tell you why all other car companies are doing fine (apart from having the same sales drop 30%+ as the D-3):
1: They are supported by their own governments at home
2: Many of them are partially owned by their home governments (VW, Renault, Nissan)
3: They protect their home markets so the D-3 cannot sell there (Japan, Korea, even the European Union to a lesser degree)
4: They know how to deal with unions at home which are much stronger than the UAW
5: They get rebates on their Value Added Tax when they export to the US
and the US cannot do the same in return.
6: They get indirect support for Research and Development from their home governments (Japan (remember MITI ?), Korea, Germany)
7: They require joint ventures with local companies for US companies to sell cars in their country (China)
8: They are the largest contributors to the US trade deficit now that oil is back below $50/barrel in spite of their assembly plants in the US
9: They benefit from billions of $ doled out by state and local governments to build their plants in southern states.
10: They have access to patient capital for long term planning that the impatient, corrupt, and short sighted US capital markets can never hope to match.
Is that enough ? Of course the D-3 have made lots of mistakes, but the playing field is not at all level here. Ford/GM compete very well in all other countries with these companies other than in their respective home markets. However, here in the US, the auto industry problems are just the tip of the iceberg. All other industries in the US that compete with foreign companies.. they are all loosing market share.
This is not about replacing one bankrupt company in Michigan with another from Alabama. This is about global competitiveness. We are becoming a branch plant economy where the only jobs are the minimum number of lowest tech jobs necessary to bribe local politicians. For $50 per person ($15B over 300M people), this government could start the process of addressing these problems, but we find it much more satisfying to blame everyone else.
25. Tom T | 12.11.08
A $14 Billion “bailout” will allow the companies to stay in business for a while longer, doing what? The same as now? A restructuring is necessary, but it will take time to redefine product(what autos/trucks to build). It will take time to retool for these changes. A structured backruptcy by the auto industry seems to be the right path. Many will lose jobs, but the result will be a leaner, more efficient industry. To expect a government appointed “Czar” to lead the way is folly. Those in the industry know what needs to be done, but harsh steps must be taken, and we must accept that some will not survive.
26. Web Smith | 12.11.08
All of the car makers’ sales are way down and seeking help from their respective governments. Our automakers’ sales are down more than the rest because this is the only country in the world that is even toying with the idea of letting its auto industry go out of business.
This is also the only country in the world where members of a former candidate for President’s campaign staff took $2.4 million from foreign car companies to lobby on their behalf. It is also the only country in the world where campaign donations from foreign car companies decide whether or not people get elected to office.
It is also the only country in the world where the MSM special interest groups distribute, out of date, fabricated, exaggerated, and incorrect information about its auto industry.
It’s a simple problem. If we don’t loan our car companies probably close to $200 billion that we might get back, 10 million Americans will be shortly be out of work with more to follow and we will lose, not loan, $250 billion per year for the next 5 years. We will also become as dependent on foreign manufacturing as we are on foreign oil and our recovery will take longer and be much more painful. Would you like to have the commerce generated from 10 million paychecks filling your collection plates and helping or would you like to be supporting 10 million people? Answer A or B.
27. Ayn Rand | 12.11.08
Atlas is shrugging… where is the incentive to innovate and compete in a global economy if the world is turning more and more collectivist each day. Where are the principles that created America and the free market society… I would argue they have all but disappeared, leaving mankind in a sad shape of “what can my taxpayers/government do for me” mentality.
28. Joan | 12.11.08
The distortion of hourly wages used to make the employees look like the bad guys is pathetic.
The executive salaries and bonuses are something every American company needs to look at. NO executive is worth a million or more a year. If the president of the United States only makes $400,000 a year, corporate execs shouldn’t make more and still expect a handout.
American car companies are failing because they have not engineered and designed a decent, reliable car. That is not the worker’s fault, it is the fault of management that still cannot figure it out. Foreign car companies are doing it, and doing it using American workers and American technology. Another point, ever had an Chrysler recently? Lousy cars, lousy customer service. My 2003 Chrysler was a financial vampire. Poor gas mileage, poor support and poor quality, and assembled in Mexico.
Now I have a Toyota. Quality, good gas mileage and service and made in my home state. It’s what will keep customers.
These company executives need to quit trying to blame the workers.
And it is funny that Republicans are suddenly so worried about spending our tax dollars. Too bad they didn’t think about that when they were pouring dollars into the Iraqui desert.
29. Ani A. | 12.11.08
I hear over and over from “conservatives” that the government should not reward incompetence. Then why did we give 20 times what the auto industry is asking to the financial industry (which by the way the Republicans supported)? It seems like the Republicans are in bed with the financial industry, but not the auto industry. Consider who the secretary of treasury is…
30. John | 12.11.08
Oh what a self-mockery the Smaller Government Republicans are. Is anyone aware that the US military is the government, and their budget is a huge part of national debt? Can you bring yourselves to accept that the $700 plus bailout of the financial industry rewards not only mismanagement but also outright fraud and is not being adequately supervised by any elected body? Perhaps you should re-name yourselves Smaller Representative Government Republicans, because obviously you support corporate democracy over the constitutional one you purport to love.
31. Wayne | 12.11.08
“This is also the only country in the world where members of a former candidate for President’s campaign staff took $2.4 million from foreign car companies to lobby on their behalf. ” Who is this candidate?
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1. Carey | 12.11.08
How about a 25 billion dollar economic incentive bilout for the VA?