Big Three Beg For Aid As Bailout Bill Stalls

Detroit's Big Three auto makers are begging Congress for a $25 billion government rescue, while the legislation clings to life support on Capitol Hill and top lawmakers and the White House suffer from bailout fatigue.

Democratic congressional leaders want to tap the $700 billion Wall Street rescue package for new loans to U.S. auto manufacturers and suppliers, but the White House and GOP lawmakers say the beleaguered industry shouldn't get any new funds.

President George W. Bush and GOP lawmakers instead propose diverting $25 billion in loans approved by Congress in September — designed to help auto manufacturers retool their factories so they can make more fuel-efficient vehicles — to cover the firms' immediate financial woes.

But auto executives, backed by leading Democrats, insist they need another $25 billion in emergency loans to avert a collapse of one or more of their companies before year's end. That would bring the total federal help for the industry to $50 billion this year.

The executives, along with the head of the United Auto Workers union, were making their case Tuesday at a hearing before the Senate Banking Committee as auto bailout backers hunted the votes necessary to pass the plan in a postelection session. Aides in both parties and lobbyists tracking the plan privately acknowledge they are far short.

The debate comes as the financial situation for General Motors Corp., Ford Motor Co. and Chrysler LLC grows more precarious. GM has said it could run out of cash by year's end without government aid.

"They're going to need to address what is the perception among some of our colleagues here that there's still some quality issues with the Big Three, and they haven't begun to do the necessary restructuring — because they have," said Sen. Carl M. Levin, D-Mich., an architect of the bailout.

Levin's bill would provide loans with initial interest rates of 5 percent to the U.S. automakers and suppliers in exchange for a federal stake in the companies or warrants that would let the government profit from future gains. Loan applicants would have to give the government a plan for "long-term financial viability."

But the measure stops short of giving the government a say over the firms' operations through an oversight board or hard limits on executive compensation. While taking advantage of the program, the companies could not pay dividends, award bonuses to executives making more than $250,000 a year, or give golden parachute payments to top people departing from the firms.

A vote on the measure — which includes an extension of jobless benefits — could come as early as Thursday. But in an acknowledgment of the long odds facing such a plan, Majority Leader Harry Reid, D-Nev., also laid the groundwork for a straight up-or-down vote on the more widely supported unemployment measure, which is probably all that can pass this week.

The Senate auto bailout bill notes that 355,000 U.S. workers are directly employed by the auto industry, and an additional 4.5 million work in related industries. That doesn't count the 1 million retirees, spouses and dependents who rely on the firms for retirement and health care benefits.

Critics argue that the industry's business practices — including lavish pay and benefits packages for auto workers — have created unsustainable costs for the faltering companies that can only be solved with bankruptcy.

"I can't see how injecting capital with all the legacy issues that each of these companies has is better than reorganization," said Sen. Bob Corker, R-Tenn.

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  • by Jan Location: Morehead City, NC on Nov 18, 2008 at 03:57 PM
    #1 Why is the Federal Government even considering the bail out of the car manufacturers? Bad precedent here.... Chapter 11 reorganization should be the next step for these companies as opposed to bailing out bad management!! They can still operate as an entity while management making the big bucks can figure out how to resolve their mess. #2 Why should people be bailed out of their mortgage problems when I worked and saved to purchase my property the good old fashion way. #3 Where are the investigations into the greedy mortgage brokers who lent to underqualified borrowers??
  • by No Bailout Location: kinston on Nov 18, 2008 at 02:08 PM
    Everyone needs to understand that $20b will only keep the big 3 above water for a few months and this is why. Japan makes better cars for many reasons and the american consumer will continue to buy japan cars because they are simply better. The union plays a big part in this problem because they are draining the money out of all the workers and doing NOTHING for them. lets just face it, the big 3 will and should go down for their bad management practices and lets hope that someone else takes over to start over again. If I could have a say on how MY money should be spent I would give the $20b to Toyota, Nissan and Honda so that they would build their great cars here and help with job losses. I hope the big 3 go down so that everyone else understand what happens when you manage poorly..!!!
  • by Z Location: Jacksonville on Nov 18, 2008 at 10:56 AM
    Julie- It is partly the fault of the workers. They knew that the company was going down the tubes but they continued to allow the stupid unions to demand more and more. The workers can't take and take and expect the company to keep it's head above water. If these workers don't tell the unions to redo their contracts they are going to find themselves without a job. The democrats need to practice what they preach and let the workers spread the wealth around, back to the company that is!
  • by Dwayne Location: Greenville on Nov 18, 2008 at 10:35 AM
    Top lawmakers suffer from bailout fatigue? How about the taxpayer and our children's children who will undoubtedly fund this atrocity for years to come? Democrat Nancy Pelosi was under scrutiny not more than a year ago for wanting her own 747 to fly around in. She is really helping the environment. Congress is hypocritical and proving themselves incompetent to deal with issues higher than their own greed.
  • by Tad Location: Jamesville on Nov 18, 2008 at 10:12 AM
    Julie, if the CEO's worked for free the auto industry's business model would fail in the current and future business climates. It is simple actually, the average worker for the auto manufacturers makes far too much money for the industry to survive without restructuring. We should let it happen now, before the government sinks billions of taxpayer dollars in companies that will eventually fail anyway. Refusing to bail them out will save them. We should not spend good money after bad. We shouldn't be bailing out the banks either. Yet I say that acknowledging the fact that alot of the banking industries problems were forced on them by Clinton administration programs designed to increase minority home ownership. A noble idea that just had no chance of working long term. The chickens just came home to roost with Barney Frank, George Bush, John McCain and barack obama asleep at the switch. Don't fret, if the car makers are allowed to reorganize, there will still be chevys and fords.
  • by Obama Snake Oil Co Location: Washington on Nov 18, 2008 at 10:11 AM
    Seems the average UAW worker for GM makes $56 thousand per year. Teachers with college average is $37 thousand. They assemble cars for less than teachers assemble children into usefull adults...
  • by Julie Location: Jville on Nov 18, 2008 at 09:18 AM
    If the government doesn't bail out the car industry I will be disgusted. If we can bail out company's that give bad loans to home buyers then we should bail out the car makers. Yes cut the pay of the CEO's and drop the prices on cars so people can afford to buy them but don't cut the pay of the employees. It isn't their fault that people are not able to afford to buy cars. If it wasn't for the car makers how would some of you get to work.
  • by Steve Location: Chocowinity on Nov 18, 2008 at 07:33 AM
    The same thing happened to the US steel industry in the 70's and 80's. Everybody complained about steel from Japan being sold cheaper than US made steel. What they forgot was Japan is an island nation with zero raw materials so all had to be shipped in, made into steel, shipped to the US....and they could still do it cheaper than us? with all the raw materials in our own backyard. What is wrong with that picture??? If we want to compete it's time to get lean and "suck it up" in all areas of this country. You can't tell me the big 3 didn't see this coming?? Where are their hybrids and fuel efficent cars? The new chevy 2009 pickup truck gets the same MPG as my 2000...hello
  • by Tony Location: GVegas on Nov 18, 2008 at 06:52 AM
    Maybe if a new pickup wasn't 40,000 dollars more people could have bought one and they wouldn't need a bailout
  • by Z Location: Jacksonville on Nov 18, 2008 at 06:35 AM
    It cost GM about $71 to make a car or truck that toyota pays about $34 for. They need to file chapter 11 and reform the company from the ground up. Tell the UAW that thay can redo their contracts so the companys can make a quailty product or they can go stand in the unemployment line. I'm sure there a plenty of americans that would love to work for them. HEY UAW TAKE ONE FOR THE TEAM AND BAIL YOURSELVES OUT!!!!
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