Short-term auto industry fix possible

Instead of full $34 billion, Congress might give just enough to ward off impending bankruptcies

December 06, 2008|By Jim Puzzanghera | Jim Puzzanghera,Tribune Washington Bureau

WASHINGTON - The heads of Detroit's Big Three automakers met more resistance from Congress yesterday in their quest for $34 billion in financial aid, but the possibilities strengthened for a stopgap compromise that would keep the industry afloat for now and keep several hundred thousand workers from losing their jobs at a time of deepening economic crisis.

With the government reporting the worst month of job losses in 34 years, President George W. Bush called on Congress to act next week to save General Motors, Ford and Chrysler. And several House Republicans endorsed the idea of giving the companies just enough - about $14 billion of the requested $34 billion - to stave off imminent bankruptcy, though Bush and congressional Democratic leaders remained at odds over where the money should come from.

In addition to reducing the immediate cost of a rescue, the compromise would give the industry, Congress and the incoming president, Barack Obama, more time to consider Detroit's future.

House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, said the news that 533,000 people were laid off in November helped solidify support for aiding the auto industry. He was more optimistic that Congress would act and was in discussions with House and Senate leaders about new legislation.

"So we're not at a point of agreement, but with very few exceptions today the members were saying, 'Yes, we should do something. We should not allow a collapse of these companies,' " he told reporters after the hearing.

Frank would not discuss specifics of legislation that could be voted on next week, but he endorsed a short-term fix until Obama takes office next month with larger Democratic majorities in the House and Senate. Obama has said it is crucial to help the industry, and the United Autoworkers union helped him win key Midwestern states in the election.

"What we need to do is keep this alive until he becomes president," Frank said. "No one thinks it will be the final bill."

Rep. Spencer Bachus, an Alabama Republican and the top Republican on Frank's committee, said a short-term fix might get his vote, though he prefers a structured bankruptcy proceeding that he said would exert greater pressure on the companies to make needed changes.

"Personally, the only course I could possibly endorse would be limited transitional assistance to allow the American domestic automobile industry to return to solvency and profitability," he said. "But then only if there's a reasonable expectation of success."

With time running out this year, another auto industry critic, Pennsylvania Democrat Rep. Paul Kanjorski, said short-term funding might be the only feasible solution. He said the company CEOs tried to use that ticking clock to force Congress to give them the entire $34 billion or risk the economic fallout.

"This idea that it's late, guys, and you've got to pass it, and you've got to do it or nothing, I'm afraid a lot of people are overestimating the willingness of a goodly number of members of Congress to play chicken," Kanjorski said.

The auto industry chief executives said they were open to the idea of stopgap aid.

"In the short term, at least from Chrysler's perspective, we're certainly open to whatever makes the most sense for Congress as far as making the bridge loan available to help us get through this trough," Chrysler Chief Executive Robert Nardelli told the committee.

Chrysler says it needs $4 billion to make it until March 31.

GM's Richard Wagoner said his company needs $4 billion by the end of the year and $6 billion more by March 31. Ford's Alan Mulally said his company doesn't need any short-term money, but has requested a $9 billion line of credit it could tap if economic conditions get worse.

The executives again defended the detailed spending and turnaround plans they submitted this week at the request of House Speaker Nancy Pelosi of California and Senate Majority Leader Harry Reid of Nevada, both Democrats.

"We're here today because we've made mistakes that we've learned from, because forces beyond our control in the credit markets have pushed us to the brink. And most importantly because saving General Motors and all the company represents is a job worth doing," Wagoner said.

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