WASHINGTON – Congressional Democrats are drafting legislation that would give the teetering Detroit automakers at least $15 billion in emergency loans early next week and grant the federal government broad authority to manage a massive restructuring of their operations.
The proposal, which could be put to a vote in Congress as soon as Tuesday, would establish a seven-member “auto board” of Cabinet officials and a chairman to be appointed by President Bush to oversee both the short-term loans and a long-term effort to restore the faltering industry to profitability. If the companies take the cash, they would be accountable to the government for nearly every move, and for every transaction of $25 million or more.
As part of that restructuring, General Motors, Chrysler and Ford could be asked to jettison their top executives, one of the chief architects of the plan, Senate Banking Committee Chairman Christopher Dodd, D-Conn., said Sunday. Stating bluntly that “GM is in the worst shape” of the three auto giants, Dodd said that GM chairman Richard Wagoner, the company’s chief since 2000, “has to move on.”
“You have got to consider new leadership,” Dodd said on CBS’s “Face the Nation.” “If you’re going to really restructure this, you have got to bring in a new team to do this.”
President-elect Barack Obama seemed to echo that view during an appearance on NBC’s “Meet the Press” Sunday, saying “we have to put an end to … the head-in-the-sand approach to the auto industry that has been prevalent for decades now.”
On Friday, Democrats in Congress broke a weeks-long stalemate with the White House over aid to the automakers, agreeing to draw funds from an existing loan program created by Congress to promote fuel-efficient technologies, as the White House had long proposed. Since then, the two sides have worked through the weekend to reach a compromise, but they have yet to agree on many details.
As described by Democratic aides, the Democratic proposal treats the auto giants more like the banks and other financial institutions that have sought help under the $700 billion financial rescue program administered by the Treasury Department.
Under the Democrats’ proposal, the Detroit Three would be eligible for low-interest loans to be disbursed by the Treasury on Dec. 15. The seven-year loans would carry a 5 percent interest rate for the first five years, and 9 percent thereafter – the same terms offered to financial firms under the Treasury program.
As long as the loans are outstanding, the auto companies would be barred from paying dividends to their shareholders or bonuses to their top executives. And they would be required to submit a long-term restructuring plan to the auto board by March 31.