WASHINGTON – Detroit’s automakers may soon be answering to a powerful “car czar,” who would dole out short-term emergency loans like a kid’s allowance, put them on a restructuring diet and hold veto power over any transaction of more than $100 million.
An overseer for the auto industry was a central part of an agreement in principle reached late Tuesday to provide $15 billion in government loans to the companies. Congressional aides and a senior administration official said the car czar would be named by President George W. Bush and tasked with overhauling the auto industry.
Congress could vote on the plan as early as today.
Negotiators reached a compromise to require the czar to revoke the loans and deny any further federal aid to automakers that failed to wring concessions from labor unions, creditors and others to ensure their survival by next spring – essentially pushing them into bankruptcy.
“If they don’t meet the conditions of restructuring, there is not going to be an endless flow of money to this industry,” warned House Speaker Nancy Pelosi, D-Calif., before the conceptual agreement was reached.
Indeed, for the large manufacturers – General Motors Corp.’s annual capital budget is about $4 billion – the amount of oversight would be dramatic. White House and congressional negotiators were coalescing around giving the czar veto-power over any asset sales, investments, contracts and commitments of $100 million or more.
That’s a looser restriction than Democrats proposed in their initial draft of the bailout, which would have set the transaction limit at $25 million. The lower figure led to fears of micromanagement from some auto industry insiders.
The companies lobbied against the $25 million threshold and privately called it unworkable.
But they’ve acceded to the car czar, reflecting their tenuous position. GM says it needs $4 billion by the end of the month to survive and another $4 billion in January while Chrysler has sought $7 billion by year’s end to avoid a cash shortage in 2009. Ford Motor Co. has said it would not seek the short-term assistance because it does not have an emergency cash-flow problem but wants a $9 billion standby line of credit in case a competitor fails. Ford spokesman Mike Moran said under the draft legislation they would need to work with the czar to be eligible for the line of credit.
Referred to as the “president’s designee” in the bill, the car czar would have vast powers. President George W. Bush would appoint the czar during the final days of his administration to oversee the restructuring of the companies.
The czar could authorize loans to GM and Chrysler LLC almost immediately after the bill is signed, or as early as next week. The seven-year loans carry an interest rate of 5 percent the first five years and 9 percent the final two years. The czar has the power to set repayment terms.
Pelosi said she had no candidates for the job, but called Paul Volcker, a former Federal Reserve chairman and now an economic adviser to President-elect Barack Obama, a good choice.