Senate Democrats seek to lower expectations for auto bailout

2:20 p.m.

WASHINGTON (AP) - Top Senate Democrats suggested Wednesday that a bill to rescue Detroit's Big Three automakers was stalled and challenged the Bush administration to take steps to save the industry if congressional efforts falter. The White House quickly rebuffed the suggestion.
Senate Majority Leader Harry Reid of Nevada sought to lower expectations of reaching a deal on the $25 billion proposal before Congress quits for the year.
While he told the Senate he still hoped lawmakers could agree to an auto deal in the "next day or two" of the current lame-duck session, he added: "If we can't do it here legislatively, I would hope that the secretary of Treasury would listen loud and clear because they could take this into their own hands and do what I think is appropriate from their perspective."
Responded White House press secretary Dana Perino: "There's no appetite for that." She said it was up to Congress to act.
Banking Committee Chairman Chris Dodd, D-Conn., was even more downbeat, calling the possibility of reaching agreement "remote."
"I don't see how in the next few days this is going to move forward," Dodd told reporters. Still, he added, "That does not mean that there are not opportunities." He suggested that the Federal Reserve could possibly step up to the job.
The difficulties of striking a deal on the package before a new president and a new Congress with expanded Democratic majorities take office appeared to be too great to overcome. The deadlock persisted even as the heads of General Motors, Ford and Chrysler returned for a second day to plead for relief and as their congressional backers urged colleagues not to punish them for past mistakes.
General Motors Corp. CEO Rick Wagoner told the House Financial Services Committee that collapse of the U.S. auto industry could lead to a loss of 3 million jobs within the first year and ripple throughout communities around the nation.
In sometimes contentious testimony, Wagoner was pressed on when GM would run out of money if the loans weren't extended.
He said he couldn't say precisely, but that the company now was burning through "$5 billion each month."
Still, with the $25 billion emergency package, "We think we have a good shot to make it through this," Wagoner said. He said he anticipated that, if the package is approved, GM would qualify for about $10 billion to $12 billion of the money.
President George W. Bush and Republicans in Congress have been reluctant to use the Treasury Department's $700 billion financial bailout program to finance the loans.
The White House wants Congress to draw the $25 billion from an Energy Department program established to encourage production of fuel-efficient cars.
Perino said Wednesday the administration supports legislation to authorize just that, but will not go along with the proposal by Democratic leaders that an additional $25 billion be taken from the government's existing $700 billion Wall Street bailout fund.
"The purpose of the $700 billion was clearly intended for financial institutions, and we wanted to keep that whole," Perino said. .
If Congress quits without taking any action, "then the Congress will bear responsibility for anything that happens in the next couple of months during their long vacation," Perino said.
Congressional Republicans battled uphill to try to pick up Democratic support for the White House plan to allow auto companies to draw emergency loans from the $25 billion fuel-efficiency fund.
Democratic leaders have rejected such a course, and environmentalists don't want that money used for anything other than its intended purpose.
But the GOP approach, being crafted by Sens. Kit Bond, R-Mo., and George Voinovich, R-Ohio, would require the automakers to plow back into the fund repaid loans, interest and income from equity stakes.
The proposal, outlined in a position paper obtained by The Associated Press, is intended to satisfy Democrats concerned about raiding the fuel-efficiency loan program. Since auto makers would not be tapping those funds immediately, supporters argue, the money would be restored by the time they were needed.
During the House hearing Wednesday, Rep. Brad Sherman, D-Calif., asked the three auto chiefs seated at the witness table before him to raise their hands if they had come to Washington on commercial airliners. No hands went up. Then he asked if any planned to sell their corporate jets. Again, no hands went up.
Sherman and Rep. Gary Ackerman, D-N.Y., told the auto executives they were having a hard time justifying to their constituents bailing out companies whose chiefs fly around in expensive private jets.
Ackerman said there was "a delicious irony in seeing private jets flying into Washington D.C. and people coming off them with tin cups in their hands."
A Senate vote on an automotive bailout plan, which would also extend jobless benefits, could come as early as Thursday, but it clearly lacks the necessary support to advance.
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Associated Press Writers Julie Hirschfeld Davis and Sam Hananel contributed to this story.

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11:46 a.m.

WASHINGTON (AP) - The top Senate Democrat sought Wednesday to lower expectations for legislation this week to help endangered carmakers, saying it would be the Bush administration's job to save the industry if Congress doesn't.

"No one should be overly concerned," if Congress can't agree on a bill to speed $25 billion in new loans to the industry, Sen. Harry Reid said. But the Nevada Democrat also said he still hopes that lawmakers can strike an elusive deal on emergency assistance in this week's lame duck session.

"If not," Reid said in a statement, "it will still be up to the White House and the Treasury Department to take the steps that I believe are necessary and warranted."

The rescue plan appeared stalled on Capitol Hill, even as the heads of General Motors, Ford and Chrysler returned for a second day to plead for relief and as their congressional backers urged colleagues not to punish them for past mistakes.

President George W. Bush and Republicans in Congress have been reluctant to use the Treasury Department's $700 billion financial bailout program to finance the loans. And White House press secretary Dana Perino has said Congress should draw the funds from an Energy Department program established by law last year to encourage production of fuel-efficient cars.

Earlier Wednesday, Sen. Richard Shelby, the senior Republican on the Banking Committee, said he did not believe there would be a turnaround in industry until its top management is ousted and its manufacturing operations are revamped.

"I don't think they have immediate plans to change their model, which is a model of failure," Shelby said. He said he thinks a large part of any such bailout would amount to "life support" for the automakers.

"I believe their best option would be some type of Chapter 11 bankruptcy," he said. "These leaders have been failures and they need to go."

Rep. Barney Frank, D-Mass., disagreed with that, saying choosing the bankruptcy option would likely mean abrogation of labor contracts. "We already have too much union busting," Frank said.

At a hearing of his House Financial Services Committee later, Frank pointedly suggested that a congressional bias exists to the extent that lawmakers seem more inclined to intervene to help white-collar bankers than blue-collar auto workers.

But Alabama Rep. Spencer Bachus, R-Ala., said the bailout would only "push the problem further down the path."

Facing a less-than-receptive greeting in the Senate Tuesday, General Motors Corp. CEO Rick Wagoner warned that the failure of the U.S. auto industry could lead to a loss of 3 million jobs within the first year and ripple throughout communities around the country.

"This is all about a lot more than just Detroit. It's about saving the U.S. economy from a catastrophic collapse," Wagoner said.

A Senate vote on an automotive bailout plan, which would also extend jobless benefits, could come as early as Thursday, but it currently lacks the support to advance.

"You're asking an awful lot," said Sen. Christopher Dodd, D-Conn. "I'd like to tell you that in the next couple of days this is going to happen. I don't think it is."

In an op-ed essay in Wednesday's editions of The New York Times, Mitt Romney, a candidate for this year's Republican presidential nomination, wrote: "If General Motors, Ford and Chrysler get the bailout that their chief executives asked for yesterday, you can kiss the American automotive industry goodbye. It won't go overnight, but its demise will be virtually guaranteed."

Romney, who was born in Detroit and whose father was an auto industry executive, wrote: "Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course - the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check."

Rank and file Republicans and Democrats from states heavily affected by the auto industry worked behind the scenes trying to develop a compromise that could speed some aid to the automakers before year's end. But it was an uphill fight.

Automakers were running into bailout fatigue on Capitol Hill. Lawmakers complained that many of the industry's problems were self-made, citing their past reliance upon gas-guzzling trucks and SUVs and opposition to tougher fuel efficiency regulations. Many wondered if the companies would be back for more money in a year.

Chrysler LLC CEO Bob Nardelli rejected suggestions that the automakers should seek Chapter 11 bankruptcy protection similar to airlines that later emerged restructured and leaner. "We just cannot be confident that we will be able to successfully emerge from bankruptcy," Nardelli said. Ford Motor Co. CEO Alan Mulally said the three automakers are highly interdependent.

The financial situation for the automakers grows more precarious by the day. Cash-strapped GM said Tuesday it would delay reimbursing its dealers for rebates and other sales incentives and could run out of cash by year's end without government aid.

Committee Chairman Barney Frank, D-Mass., suggested congressional bias in agreeing to help white-collar bankers but not blue-collar auto workers.

But Alabama Rep. Spencer Bachus said the bailout would only "push the problem further down the path."