Washington: The House of Representatives approved bailout legislation on Wednesday that would force US automakers to restructure or fail, sending the measure to the Senate where prospects for passage appeared grim.
“Gonna be tough, but haven’t lost all hope,” one Democratic aide said of chances in the Senate, which could vote as early as Thursday on the plan to provide up to $14 billion in bridge loans to help avert collapse of one or more carmakers.
Democrats sought to reclaim momentum in the bailout effort, with the bill they negotiated with the Bush administration clearing the chamber by 237-170.
“This legislation is about offering Detroit and America a chance to get back on track,” House Speaker Nancy Pelosi said in a floor speech before the vote. “It gets down to a question of tough love.”
The White House weighed in just before the vote with a public endorsement aimed at Republicans skeptical of the rescue and demanding a tougher approach for helping General Motors Corp, Ford Motor Co, and Chrysler LLC.
Democrats advocated passage based on the belief that government inaction could lead to an industry collapse that would cost taxpayers far more than the loans intended to see them through March and help them restructure.
While the House stuck to its plan for quick action, muchuncertainty surrounds the bill’s fate in the Senate where a razor-thin Democratic majority cannot ensure passage.
Senate Democrats will have difficulty reaching the 60 votes necessary to overcome procedural hurdles, which some Republicans have vowed to erect to slow or even block the legislation.
Democrats need up to a dozen or more Republicans to win passage, a Democratic aide said.
“The critics have been very vocal. The question is where are the (Senate Republican) supporters of the Big Three,” another Democratic aide said.
Sen. Richard Shelby, an Alabama Republican and ranking member of the Banking Committee, was vocal in his opposition.
“Unless Chrysler, Ford and General Motors become lean and innovative and competitive in the market place, this is only delaying their funeral,” Shelby said.
Both the House and Senate would have to pass an identical measure before it could be sent to President George W Bush to sign into a law.
Many in Congress are anxious to prevent the threatened collapse of the Detroit Three - which directly employ 250,000 people and another 100,000 in related businesses. The auto industry says its future affects 1-in-10 US jobs.
Shares of GM and Ford, which declined as Republicans voiced opposition, drifted lower in extended trade. Ford stock lost 2.8 percent to $3.16 from a $3.25 close and GM slipped 1.5% to $4.53 from $4.60.
Credit markets also want a bailout, as a bankruptcy or failure of the Detroit Three would threaten billions of dollars of financial instruments, say credit analysts.
GM and Chrysler are seeking billions by month’s end to survive. Ford is seeking a line of credit to be tapped if its finances worsen more than expected in 2009.
Democrats are proposing direct bridge loans using funds previously appropriated for helping automakers retool factories and make more fuel efficient cars. In return, carmakers would give the government an equity stake equal to 20% of whatever is borrowed.
Any loans are intended to carry the companies through 31 March, after which more help would depend on the quality of restructuring plans submitted to the government.
A presidentially appointed trustee, or “car czar” would enforce a myriad of conditions and judge restructuring, including the fairness and depth of concessions from labor, management, bondholders, vendors and lenders.
The “car czar” would report to Congress and could recommend bankruptcy as a restructuring option if the official deems restructuring plans inadequate.
Other conditions would prohibit bonuses for officers or “golden parachutes” and would make the companies sell or terminate leases on their corporate jets.
The planned conditions and “car czar” powers are not strong enough for some lawmakers who want more ironclad guarantees.