House passes $14 billion auto bailout

WASHINGTON – The House on Wednesday night approved an emergency plan to prevent the collapse of the nation’s domestic automobile industry, but the measure faces serious opposition in the Senate, where Republicans are revolting against a White House-brokered deal to speed $14 billion to cash-starved General Motors and Chrysler.

After battling through the weekend to reach a compromise with congressional Democrats, the White House Wednesday dispatched Chief of Staff Joshua Bolten to sell the plan to restive Republican senators. But many GOP lawmakers emerged from a combative luncheon with Bolten unconvinced the plan would compel Detroit automakers to make the painful changes necessary to restore them to profitability.

After mostly partisan debate, the House voted 237-170 to approve the measure. But with Sen. Richard Shelby, R-Ala., and other conservatives threatening to block consideration of the measure, even some Republican advocates of the bailout said it is unlikely to attract sufficient GOP support to win approval in the closely divided Senate.

“I don’t think the votes are there on our side of the aisle,” said Sen. George Voinovich, R-Ohio, a stalwart champion of the auto industry. “Some effort needs to be made to respond the concerns of my colleagues.”

At the heart of the conflict is a debate over how to best help the car companies not only survive the deepening recession but rid themselves of a legacy of debt, high production costs and plush worker benefits that have left them unable to compete with their more nimble foreign competitors.

GM, Chrysler and Ford have already moved to streamline costs; along with the UAW, they have offered to make additional concessions. But many Republicans think the automakers’ problems could be more efficiently resolved by a bankruptcy court with legal power to dissolve existing contracts than by a government “car czar” whose actions could be swayed by Washington politics.

“If we don’t have the forced restructuring plans in place, many of us don’t believe that American car companies will come out of this in a competitive position and the taxpayers’ money will be wasted,” said Sen. John Ensign, R-Nev.

Ensign added that he fears a car czar would not have the expertise to deal with the auto companies.

Democrats have resisted forced restructuring, arguing that, under the Bush administration it could amount to open season on the UAW. They also sympathize with the automakers’ argument that bankruptcy proceedings would scare off potential buyers.

“People buying cars want to know that they’ll continue to have a relationship with an entity that can service the cars,” House Financial Services Committee Chairman Barney Frank, D-Mass., the chief House negotiator on the package, said during House debate.

White House deputy chief of staff Joel Kaplan defended the measure, saying “we think we’ve come up with the right solution.” Kaplan, one of the chief negotiators for the White House, said President Bush would personally lobby senators in the coming days.

The measure would speed up to $14 billion in emergency loans to the Detroit automakers, enough to keep GM and Chrysler in business through the end of March. Ford has also requested access to a federal line of credit but has said it does not expect to need any money immediately.

In exchange for the cash, the automakers would be required to give the government warrants for stock worth 20 percent of the value of the loans.

The companies also would be required to submit to the authority of a car czar, who would seek to “facilitate an agreement” for long-term viability in talks with the car companies, their employees and retirees, their unions, creditors, suppliers, dealers and shareholders.