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The White House and Democratic Congressional leaders said that they were close to agreeing on the terms of a $15 billion government rescue of the American automobile industry that would be directed by one or more appointees of President Bush and would impose expansive federal oversight of the auto companies.
The House speaker, Nancy Pelosi, said she hoped that Mr. Bush’s appointee — or car czar, as the position has come to be known — would not need to be replaced by President-elect Barack Obama, raising the prospect that the outgoing and incoming administrations would cooperate in selecting someone.
The president’s designee would disburse the short-term emergency loans to General Motors and Chrysler, which are at risk of financial collapse, and would directly supervise the reorganization plans that the auto manufacturers have agreed to carry out in exchange for government aid. The government also could receive warrants that would give it equity stakes in the companies.
The Ford Motor Company announced Monday evening that it would not seek short-term federal aid, denying that it faced the same “near-term liquidity issue” as G.M. and Chrysler.
“Long-term financing must be conditioned on the principle that taxpayers should only assist automakers executing a credible plan for long-term viability,” Ms. Perino said in a statement. “We’ll continue to work with members on both sides of the aisle to achieve legislation that protects the good faith investment by taxpayers.”
Under the plan, unveiled by Democratic leaders, the Treasury Department would cut checks for the car companies as soon as next week. The proposal also calls for President Bush to name a “car czar” to manage a vast restructuring of the firms and restore them to profitability.
Democrats bent to the will of the president on several key demands, most notably in agreeing that the emergency funding would be drawn from an existing loan program aimed at promoting fuel-efficient technologies.
Still, the White House objected yesterday to several elements of the Democratic proposal, congressional aides said, including requirements that the car companies notify Washington of any transaction of more than $25 million and that they pull out of lawsuits against states seeking to enforce tougher tailpipe-emissions standards.
UPDATE: December 10, 2008 08:51 am
The White House and congressional Democrats yesterday reached an “agreement in concept” on a plan that would throw a government lifeline to the faltering Detroit auto industry but require the auto giants, their workers and creditors to quickly negotiate a path to profitability or face the prospect of bankruptcy.
The agreement, which is set for a vote in the House today, calls for the government to speed $15 billion in emergency loans to the car companies as soon as next week, and for President Bush to immediately name a car czar to oversee the bailout. The companies would be required by March 31 to cut costs, restructure debt and obtain concessions from labor sufficient to report a “positive net present value,” according to a senior administration official, speaking on condition of anonymity because final language was still under discussion.
If the firms failed to make progress toward that goal, the agreement would require the car czar to revoke the loans and develop a new plan that could include the option of seeking Chapter 11 bankruptcy protection, the official said. If the companies could not agree on steps to guarantee their long-term survival, they would be denied additional federal assistance.
The official said the agreement would create “three very serious sticks to ensure that this is truly what it was intended to be: bridge financing for firms that have a plan and a path to become competitive,” rather than becoming “the first in a number of interminable loans that these guys can get to avoid making the hard choices.”
“There’s bailout fatigue right now,” said Rep. Roy Blunt of Missouri, the second-ranking House Republican. “People are tired of ‘Give us the money and we’ll see what we need to do with it.’ I think that’s why . . . a lot more questions are being asked both by taxpayers and by members of the House and Senate.”
While big financial institutions such as Citigroup and large banks got tens of billions in aid without their chief executives having to trek to Washington hat in hand, the chief executives of General Motors, Ford and Chrysler have come pleading twice—and most likely will have to accept tougher conditions, such as tighter government oversight and more limits on their pay.
“We’re faced with a reality that we’ve given away almost $1 trillion in taxpayer money with what we thought were some strings attached to a bunch of financial industry people,” Rep. Gary Ackerman (D-N.Y.) told the Big Three chief executives last week. “And you face the fury around here with the American public of having really no accountability for any of that money.”
GM also bought a full-page ad in this week’s trade publication Automotive News, apologizing for its failures.
“At times we violated your trust by letting our quality fall below industry standards and our designs become lackluster,” read the ad.
Despite the mea culpa, a key talking point among GM leaders has been to express support for Chairman and Chief Executive Rick Wagoner, whom Senate Banking Committee Chairman Christopher Dodd (D-Conn.) has called on to resign.
“The management has worked very hard to get where we need to go,” Kent Kresa, who has been an outside director at GM since 2003, said.
But GM’s future depends on getting a $4-billion government loan by the end of the month, Wagoner told Congress last week. After House Democrats unveiled a draft bill Monday that requires government approval of any company expenditures over $25 million and demands that automakers drop their support for a lawsuit over California’s new greenhouse gas vehicle emissions standard, GM said it would abide by the conditions.
The measure would be open to Detroit’s Big Three, but is expected to provide emergency loans only to General Motors Corp. and Chrysler, which have said they could collapse within weeks absent federal help. Ford Motor Co. has said it doesn’t need an immediate cash transfusion, but wants a $9 billion line of credit to insulate against further deterioration in the economy.
The rescue took shape with the nation in recession, Congress and the presidency both in transition, Wall Street ricocheting daily and the Federal Reserve and Bush Treasury Department fighting to steady the reeling financial industry.
