Auto bailout clears House; bigger hurdle ahead
In the Senate, many Republicans resist $14 billion package, worried that the industry won't repay US loans or become more competitive.
Citing the risk of massive job loss, the House voted Wednesday to loan US automakers $14 billion in return for a direct government hand in restructuring the ailing industry. But the biggest hurdle to clearing the bailout bill lies ahead in the US Senate, where the 60 votes needed to avoid a filibuster and pass the bill are in doubt.Skip to next paragraph
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Although the legislation includes protections for taxpayers and the White House has signed off on it, many Senate Republicans say they're not convinced that the loans will be repaid or that the plan will produce a more viable domestic auto industry.
“People realize this is an incredibly weak bill. It’s the product of an administration that wants to kick the can down the road and let someone else deal with it, and it has minimal, very minimal, support in our caucus,” said Sen. Bob Corker (R) of Tennessee, after a GOP caucus meeting on the bailout on Wednesday.
While some Republican lawmakers insist that the bill produces too much government intervention in the economy, others caution that it may not provide enough.
“I’m really skeptical that the federal government can appoint somebody who can do a better job of running these businesses than the board of directors and the management of these car companies, but let’s say they can,” says Sen. John Cornyn (R) of Texas. “They still need to have the appropriate powers to restructure the companies in a way to make them competitive and viable in the long run. I don’t think that power and authority have been given.”
The House bill, which passed on a 237-to-170 vote, allows US auto companies to tap bridge loans as early as next week.Over the longer term, it sets up a federal administrator, dubbed a “car czar,” to preside over bargaining among stakeholders - auto companies, unions, suppliers, dealers, and other creditors - on how to cut costs and restructure the industry to be more competitive.
If the parties are not able to come together over a restructuring plan by March 31, then Washington can require immediate repayment of the loan.
“The taxpayers get a return on their investment or are the first in line to be repaid,” said Speaker Nancy Pelosi in a floor speech just before the vote.
As a safeguard to taxpayers, the legislation provides that the government be given nonvoting shares in company stock to ensure that taxpayers benefit from any future growth. Lawmakers also added a requirement that taxpayers be repaid first, even if the company enters bankruptcy.
Companies accepting bridge loans would be barred from paying dividends or bonuses or “golden parachutes” for highly paid employees for the duration of the loan. The bill also mandates the sale of corporate jets.
In a bid to ensure that car companies do not use taxpayer loans to shift more production overseas, the bill also requires management to notify and allow the car czar to disapprove of any asset sale, investment, contract, or commitment of more than $100 million, up from $25 million in the first draft of the bill.
After negotiation with the White House, Democrats dropped a measure that would have banned automakers accepting financial assistance from supporting legal challenges to state laws that impose higher greenhouse gas emission standards than those in federal law.