Auto bailout prospects revived in Senate
Prospects for an auto industry bailout revived in the U.S. Senate on Thursday as surprise negotiations on a compromise moved forward and a vote was possible later in the day. Senate Majority Leader Harry Reid said on the Senate floor that the deal, if struck, “would overwhelmingly pass” the chamber that just hours ago seemed resigned to sending the automakers back to Detroit empty-handed. The scenario at the core of the possible compromise was proposed by Sen. Bob Corker, a Tennessee Republican, who would grant loans under stricter conditions than favored by Democrats and the White House.
By John Crawley and Thomas Ferraro
WASHINGTON (Reuters) – Prospects for an auto industry bailout revived in the U.S. Senate on Thursday as surprise negotiations on a compromise moved forward and a vote was possible later in the day. Senate Majority Leader Harry Reid said on the Senate floor that the deal, if struck, “would overwhelmingly pass” the chamber that just hours ago seemed resigned to sending the automakers back to Detroit empty-handed. The scenario at the core of the possible compromise was proposed by Sen. Bob Corker, a Tennessee Republican, who would grant loans under stricter conditions than favored by Democrats and the White House.
“Good faith negotiations are going on as we speak,” Reid said.
General Motors Corp and Chrysler LLC are seeking billions of dollars in immediate aid, while Ford Motor Co wants a hefty line of credit.
GM and Chrysler have warned they could collapse without billions in immediate federal intervention. Auto sales have plummeted amid a global economic slowdown.
The House of Representatives passed its version of the legislation on Wednesday. But the Republican minority in the Senate appeared to have more than enough votes to stop the White House-backed legislation with a procedural roadblock.
Shares of GM and Ford rose in extended trading following Reid’s comments. Ford shares rose nearly 5 percent to $3.04 from a $2.90 close, while GM climbed nearly 2 percent to $4.20 from $4.12 at the end of regular trading.
Reid hoped for a vote on Thursday but also held out the possibility that negotiations could stall or fail.
“Everybody is trying to figure out how we can move forward. It’s a long shot but I think we could still come out with something,” a Senate Democratic aide said.
The House has adjourned for the year but could be called back, which would be necessary if the Senate approves the compromise plan. A House Democratic aide said the chamber could not vote on a modified Senate version until next week at the earliest.
Republicans are reluctant to write another check for private industry after a Wall Street bailout Congress approved at President George W. Bush’s request, triggering a public backlash. Republicans question if the auto plan would work or merely increase the record federal deficit.
“The best route for the long-term viability of ailing car companies may be a rocky one,” said Senate Republican leader Mitch McConnell. “Government help is not the only option. It’s not even the best option.”
The White House lobbied reluctant Republicans to support legislation on the table now. But with Bush’s influence waning in the final weeks of his unpopular administration, “no one cares what the White House thinks,” a Republican aide said.
The Corker plan, which grew out of a combative exchange with U.S. auto chief executives at a hearing last week, would require a number of concessions before federal money is awarded. The companies would have to file Chapter 11 bankruptcy if conditions were not met by a fixed date.
The Democratic plan would extend aid until March 31 after which more help would depend on the quality of restructuring plans demonstrating the companies’ ability to survive and compete.
The Corker alternative would require the companies to immediately bring unionized wages in line with scales at foreign competitors, mainly Japanese companies, that operate assembly and other plants.
Japanese, Korean and German manufacturers have or are building 18 auto assembly plants in the United States. None is unionized and 11 are located in Southern states, including Tennessee.
Another provision would require a portion of contributions to a United Auto Workers retiree healthcare trust be in stock instead of cash, a move that would improve the industry’s liquidity crunch.
Corker told reporters he spoke on Thursday with UAW President Ron Gettelfinger about the proposal. Additional meetings between lawmakers and the UAW were held as the day wore on, including a discussion involving Senate Banking Committee Chairman Christopher Dodd of Connecticut.
Corker said GM “was very supportive” of his alternative, which he said was the “only way” a bailout was going to happen right now.
If Democrats fail to pass a bailout, they could try again on January 6 when the new Congress convenes with Democrats in expanded control of the Senate.
The White House could also reverse course and help automakers by dipping into the $700 bailout approved in October for the financial services industry.
“Both are options,” a Democratic aide said. “The question is could automakers last that long” without an immediate infusion of federal cash.
GM has warned its cash levels would dip below minimum levels by the end of this month absent help. Chrysler has said it could hold on into 2009 and Ford’s liquidity is stable for now. Ford is seeking a government line of credit as a hedge against worsening finances down the road.
GM, Ford and Chrysler employ nearly 250,000 people directly, and 100,000 more jobs in the supplier field could hang on their survival.
(Additional reporting by Ross Colvin, Matt Spetalnick, Kevin Drawbaugh, Donna Smith and Richard Cowan; Editing by Peter Cooney)