Auto giants up against bailout fatigue
For many lawmakers of both parties, it may be one costly bailout too many.
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Democratic leaders in Congress insist that they'll push hard for aid to automakers in this fall's lame-duck legislative session. They want to tap the Treasury's $700 billion financial rescue package for emergency loans to Detroit.
But the legislative rank and file may be experiencing bailout fatigue following weeks of shoveling billions at reeling Wall Street firms. And the Bush administration remains opposed to what it calls handouts for failing – and highly unionized – auto manufacturing firms.
The situation could change the minute a new Obama administration takes office. But for now, control of the US government remains divided between the parties, and the Big Three appear to be the place where the GOP is drawing its line.
"Some Republicans may see this as an opportunity to get back to their tried-and-true free-market principles," says Alan Abramowitz, a political scientist at Emory University in Atlanta who studies the makeup of political parties.
At a packed Senate Banking Committee hearing on the auto industry's future Nov. 18, most senators seemed to agree that the companies had brought many of their problems on themselves.
"No one can say they didn't see this coming," said Senator Dodd.
Auto-industry leaders laid blame on the worldwide economic downturn, however, pointing out that per-capita sales have plunged to their lowest point since World War II. They pleaded for a financial bridge to carry them over the chasm of the current recession.
Contrary to popular opinion, Detroit has kept up with the times, according to auto executives.
"We've moved aggressively in recent years to position GM for long-term success," said General Motors CEO Rick Wagoner in his prepared testimony. "And we were well on the road to turning our North American business around."
Meanwhile, Treasury Secretary Henry Paulson on Nov. 18 told a separate congressional hearing that the administration remains firmly opposed to using cash from the $700 billion Troubled Asset Relief Program (TARP) to help GM, Ford, or Chrysler.
"There are other ways" to help the troubled firms, Secretary Paulson told the House Financial Services Committee.
An auto bankruptcy would not be a good thing, particularly given the weakness of the overall economy, said Paulson.
But solving their financial problems should be done in a manner which "leads to long-term sustainable viability," said the Treasury chief.