With a draft bill in hand, Democrats and the White House stepped up talks Monday night in hopes of joining forces behind a proposed $15 billion loan package aimed at keeping General Motors Corp. and Chrysler from falling into bankruptcy this winter.
The Bush administration was pressing for tighter requirements to ensure that none of Detroit’s Big Three gets any additional aid after March 31 unless it has first won government approval of a restructuring plan to remain viable.
And Sen. Bob Corker, a Tennessee Republican whom Democrats once hoped to enlist in drafting the bill, said the draft “appears to be weak, and lacking are the benchmarks we believe are necessary to put these companies on a viable sustainable path.”
But House Financial Services Committee Chairman Barney Frank (D-Mass.) remained hopeful that an agreement will be reached, and both he and House Speaker Nancy Pelosi (D-Calif.) underscored the need for major change by the industry if it is to survive.
“I don’t know where people who think more money is coming if the plan is rejected have been living,” Frank said. “Let them get me the votes for this one.”
“This notion — that there is an infinite number of members of Congress who will vote them an infinite amount of money even if their plan is rejected — is bizarre. The likelihood of them getting another penny if this plan is rejected March 31 is zero.”
Pelosi said there will not be “an endless flow of money” to the automakers unless they carry out the restructuring.
“We call this a barbershop. Everyone is getting haircuts, in terms of the conditions,” she said. “Labor has to take a haircut because of the concessions and expediting the concessions. Shareholders have to take a haircut. There has to be consideration of the relationship with dealerships, with suppliers, and the management itself has to take a big haircut on all of this.
“We’ll see how willing everyone is to go into the future.”
The 31-page draft followed three days of negotiations among Democrats, but there has been little Republican support thus far in the House, and getting President Bush on board is crucial if the package has any chance of passing.
“This is no blank check or blank hope ... or cause for celebration,” said Senate Majority Leader Harry Reid (D-Nev.). “But if senators are willing to work together in the next two days, we can pass legislation that represents good legislation, though not perfect, that will enable America’s largest single manufacturing base to continue.”
As drafted, the bill drops earlier plans to require a seven-person oversight board and instead gives the administration the discretion to appoint “one or more” individuals to fill this role. This is closer to what the White House wanted when it proposed last week to name a special adviser in the Commerce Department. And the common goal is for government to use its leverage to impose what amounts to an out-of-court bankruptcy settlement on any company seeking aid.
Alone among the Big Three, Ford Motor Co. is still hoping that it has enough cash to weather the storm, but it also has asked for access to a $9 billion government credit line and could be at more risk if GM and Chrysler go under. GM estimates it needs as much as $15 billion in the first quarter of 2009. Chrysler estimates it will need $4 billion in the same period.
For this reason, the $15 billion may not be adequate through March 31, and Democrats remain frustrated that the administration has refused to tap Treasury’s financial rescue fund.
“It’s better than nothing,” Frank told Politico, “but it’s silly to do this in a way that nickels and dimes it.”
Pelosi also raised the possibility that more money may be needed to get to March 31, and the bill leaves open the door for the incoming Obama administration to tap the Treasury funds. But after the first quarter — if no restructuring plan is in place — the speaker made clear that her patience will have run out.
For the California Democrat, the whole $15 billion loan package is built on a financing scheme not to her liking. The money would come — at least temporarily — from prior appropriations for an advanced technology program to speed the production of more-energy-efficient cars.
The technology program is important to auto-related companies in California, and the speaker had adamantly refused to make it available until it became apparent that the Senate was prepared to force the issue. To help appease environmentalists, she is already preparing to restore money from the so-called Section 136 program in February, and the draft would also bar the auto companies from pursuing litigation challenging California’s tighter tailpipe emissions standards for automakers.