Auto bailout: Congress gets closer to a decision

Lawmakers say bankruptcy for Detroit's Big Three is 'not a viable option.'

By , Staff writer of The Christian Science Monitor

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    Tough talk: Richard Wagoner of General Motors, Ron Gettelfinger, of the United Auto Workers International Union, and Alan Mulally of Ford Motor Company at Thursday's Senate hearing.
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Two weeks after bruising hearings on their plea for federal help, Detroit's Big Three returned to Capitol Hill with a bigger request, a chastened tone, and more political muscle.

Heading toward what would be the last vote of the 110th Congress, Democratic leaders and the Bush White House are still at odds over how to fund the automakers' $34 billion loan request.

But there's a growing consensus among lawmakers once critical of the bailout that inaction – or punting the decision to the Obama administration – is no longer an option.

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"Bankruptcy is not a viable option, because it will seal the death of the domestic automobile industry," said Sen. Charles Schumer (D) of New York, at a hearing of the Senate Banking Committee on Thursday.

"I think I speak for many of us here: We care less about where the money comes from than how it's spent," he said, adding that he still did not trust the management of US auto companies to direct their own recovery.

In a bid to regain trust on Capitol Hill, the CEOs of the Big Three drove to Washington for back-to-back hearings this week – eschewing the corporate jets that riled lawmakers at their last appearance on Capitol Hill.

General Motors CEO Richard Wagoner finished the last leg of his drive in a prototype of GM's plug-in hybrid – the Chevy Volt, which was parked nearby for lawmakers to see.

"We're just plowing ahead because this innovation is exciting to us," said Tony Posawatz, on site to show the Volt to lawmakers and the press.

"We're the only ones on record to do this high-volume production [of electric cars], once we get through these near-term economic issues," he added.

At the same time, the United Auto Workers union announced contract concessions on Wednesday to bolster the case that Detroit is changing its ways.

"We and the workers and retirees we represent are prepared to do our part to ensure that the companies can continue as viable operations," UAW president Ron Gettelfinger told the Senate banking panel on Thursday.

Meanwhile, UAW members swarmed over Capitol Hill, trolling for votes – or at least a less hostile stance from lawmakers opposing the bill.

"I think we were able to put a personal face on the situation," said Mike Herron, chairman of UAW Local 1853 at the Saturn plant in Spring Hill, Tenn. In the run-up to Thursday's hearings, Local 1853 members met with Sen. Bob Corker (R) of Tennessee, who has opposed a bailout.

"We wanted to be sure that he understood that we have 30,000 people in middle Tennessee who rely on Saturn for a job," Mr. Herron said. "Suppliers, school teachers, bankers, shopkeepers are all scared to death about what's happening, just as they are in Detroit."

Union concessions include a willingness to modify job security and retiree health care provisions in its 2007 contract.

It's one gesture among many to win enough votes in Congress to pass a $34 billion aid package. The new request is up from a $25 billion request for emergency federal loans last month. It's backed by especially grim November sales figures, released this week, signaling a drop in the sales of new vehicles by 37 percent to 746,789.

It's "the lowest per capita US vehicle sales in 50 years," Mr. Wagoner of General Motors told the Senate Banking Committee on Thursday. But with federal help, success is fully achievable," he added.

In a shift of tone, he thanked Congress for its help and guidance in developing a comprehensive plan, which includes a reduction in brands, models, and retail outlets, suspension of GM's common stock dividend for the life of any federal loans associated with the law, and changes in executive compensation.

"We're here today because we made mistakes, which we're learning from, and because some forces beyond our control have pushed us to the brink. Most importantly, we are here because saving General Motors is a job worth doing," he said.

GM is seeking $12 billion in short-term loans, along with a $6 billion line of credit in case the severe market downturn persists. The Ford Motor Co. wants a $9 billion line of credit. Chrysler is asking for $7 billion in loans by the end of the year.

In a lame-duck session last month, House Speaker Nancy Pelosi and Senate majority leader Harry Reid gave Detroit automakers until Dec. 2 to come up with a "viable and accountable" plan to restructure the industry.

"I came here today to tell you that I heard you loud and clear," said Alan Mulally, president and CEO of the Ford Motor Co., who said his company is now committed to a balanced product portfolio with more small, fuel-efficient vehicles.

Should support for these plans gain traction this week, as expected, there are still deep rifts over how to come up with $34 billion to pay for it.

President Bush wants any funding to come from $25 billion already provided in a Department of Energy loan program for automakers to develop more fuel-efficient cars.

Speaker Pelosi and Senator Reid say the funds should be used for that purpose. The White House should tap the $700 billion Wall Street bailout to help Detroit, they say.

While some Republicans, including the ranking member on the Senate Banking Committee, continue to oppose a "bailout" for Detroit, the new attitude by automakers and concessions by unions are shifting the political calculus in Congress.

"Once the auto workers threw in concessions, it was no longer a question of simply punishing overpaid auto executives. The concessions made it possible for people either hostile to the idea or wavering to access something other than the Energy Department funds," says Ross Baker, a political scientist at Rutgers University in New Brunswick, N.J.

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