WASHINGTON – The $25 billion rescue plan for the auto industry, desperately sought by Detroit’s beleaguered Big Three, collapsed Thursday as Congress drew the line at one more bailout and Democrats said they wouldn’t even consider it until the companies produced a convincing plan for rebuilding their once-mighty industry.
The demise of the rescue – at least for now – left uncertain the fate of General Motors Corp., Ford Motor Co. and Chrysler LLC, and sent Wall Street spiraling to its lowest level in years. The Dow Jones industrials dropped 445 points, the second straight plunge of more than 400, and hit the lowest point in nearly six years.
The carmakers have been clobbered by lackluster sales and choked credit, and are battling to stay afloat through year’s end. Failure of one or more of the Big Three would be a severe further blow to the floundering economy – and to many Americans’ view of the nation’s industrial strength – and throw a million or more additional workers off the job.
But Democratic leaders scrapped votes on the auto rescue, postponing until next month a politically tricky decision on whether to approve yet another unpopular bailout at a time of economic peril, or risk being blamed for the implosion of an industry that employs millions and has broad reach into all aspects of the U.S. economy.
“Until they show us the plan, we cannot show them the money,” Speaker Nancy Pelosi, D-Calif., said at a hastily called news conference in the Capitol.
GM, Ford and Chrysler quickly issued statements promising to submit the blueprint the Democrats demanded.
Pelosi and Senate Majority Leader Harry Reid, D-Nev., said Congress might return to work in early December for a vote on aid to the carmakers – but only if they show Congress they could use the funds to transform their struggling industry into a viable one.
For now, however, the Democrats said the aid plan lacked the support to pass Congress and be signed by Bush.
Bush and congressional Republicans had balked at Democrats’ suggestion to draw emergency auto industry loans from the $700 billion Wall Street rescue fund. And most Democrats were unwilling to go along with a separate, bipartisan effort backed by the White House to temporarily divert an existing program to help carmakers produce vehicles that burn less gasoline to cover the companies immediate financial needs.
But with GM warning it could go under before year’s end, Democratic leaders were unwilling to close up shop for the year and appear to turn a deaf ear to the industry. They called for a Big Three viability plan by Dec. 2, scheduled hearings that week on the report, and said a vote on a bailout could come the week of Dec. 8.
“Yes, we’re kicking the can down the road, because that will give us the opportunity to do something positive,” Reid said. “But that will only happen if they get their act together.”
The chief executives of the Big Three automakers appealed personally to lawmakers for the loans this week, saying their problem was the economic meltdown that has walloped their industry – not that they were manufacturing unappealing cars.
But whatever support they found sagged when it became known that each of them had flown into Washington aboard multimillion-dollar corporate jets. Reid observed that was “difficult to explain” to taxpayers in his hometown of Searchlight, Nev.
Pelosi said she had little patience left for excuses from the carmakers on why they haven’t turned their businesses around.
Even if lawmakers return to vote, they are likely to insist on numerous conditions on any loans. Democrats and Republicans alike want the government to get a chance to share in future profits by the auto companies, require them to limit executives’ pay packages and prohibit use of the funds for lobbying or paying shareholders dividends.