Auto aid may hinge on additional conditions, Senate leader says

WASHINGTON — Senate proponents of $25 billion in emergency loans for automakers don’t have the votes to pass the measure without additional conditions on the aid, Senate Banking Committee Chairman Christopher Dodd said Tuesday night.

"Inaction is not an option," Dodd, D-Conn., said at the close of a four-hour hearing on legislation to provide the aid to the Detroit 3 and possibly suppliers.

Afterwards, in a hallway outside the hearing room, Dodd said he will talk with Senate leaders and try to find a way to help the industry.

"My sense is that between inaction and writing a (blank) check, there is a ground I think you can build a majority for. We’re not there yet," he said.

"Trying to jam something through, I think, would be a mistake."

At the hearing, most Republicans expressed strong opposition to the loan legislation. Even some Democrats said stronger conditions must be placed on any assistance.

Dodd himself said taxpayers don’t want to see executives continue to receive multi-million-dollar salaries while asking for government help.

One alternative being explored is accelerating $25 billion in previously approved loans to help U.S. automakers retool to build fuel-saving vehicles. But Dodd said that idea is opposed by House Speaker Nancy Pelosi.

Self inflicted problems cited

The committee is considering legislation that would enable General Motors, Ford Motor Co. and Chrysler LLC to tap into $700 billion in bailout funds for financial institutions. The George W. Bush administration and many Republican lawmakers opposed the measure.

In introductory remarks, Dodd said many of the domestic industry’s problems are self-inflicted. But he said the failure of one or all of the Detroit 3 would further harm the nation’s economy.

Dodd urged the Detroit 3 not to oppose federal regulatory efforts to improve fuel-efficiency standards and reduce emissions.

Sen. Richard Shelby of Alabama, the committee’s ranking Republican, said that the proposed $25 billion in low-interest loans might merely tide the carmakers over for a few months. After that, he warned, they could seek another $25 billion or more.

"Is this just life support?" Shelby asked.

Chapter 11 suggested

Sen. Bob Corker, R-Tenn., suggested Chapter 11 reorganization might be the best way to clean up the Detroit 3′s labor legacy costs and make the other operating changes needed to assure the companies’ long-term health. That notion has been rejected by automakers, who argue that consumers would shun cars made by a company in bankruptcy.

Corker said it is unlikely that Congress will complete a rescue package for the Detroit 3 during its lame-duck session. GM executives have said the company cannot wait for help until President-elect Barack Obama is inaugurated in January.

Sen. Jim Bunning, R-Ky., raised the possibility of a prepackaged bankruptcy, which would have the federal government provide bankruptcy financing while the Detroit 3′s stakeholders worked through a reorganization plan.

Sen. Robert Bennett, R-Utah, was more sympathetic. He said he believes Detroit 3 executives understand their challenges. He expressed hope that government can provide "as soft a landing as possible."

Committee Democrats were more receptive to the bailout proposal. Sen. Sherrod Brown, D-Ohio, said failing to help the Detroit 3 now was the surest way to turn an economic recession into a depression.

Some Democrats sought to tie the aid to conditions.

Boost fuel efficiency

Sen. Robert Menendez, D-N.J., said the industry should agree to increases in fuel economy standards beyond 2020. He said automakers should stop challenging the authority of states to enforce their own greenhouse gas emissions rules.

Sen. Robert Casey, D-Pa., said automakers that get loans should provide government with monthly reports on progress they are making in meeting cost and revenue goals.

Testifying before the committee, Sen. Debbie Stabenow, D-Mich., said the auto industry accounts for one in 10 U.S. jobs and 4 percent of gross domestic product.

Failure of the Detroit 3, Stabenow said, would harm the U.S. defense industry, which relies on parts from the companies’ suppliers. A bankruptcy, she added, would cost the quasi-governmental Pension Benefit Guaranty Board tens of millions of dollars to cover the lost pensions of workers.

"Neither failure nor bankruptcy is an option," Stabenow said.

In testimony prepared for the hearing, the Detroit 3 CEOs and UAW President Ron Gettelfinger said that a credit crunch beyond their control has obstructed an industry restructuring that has included plant closings, work force reductions and a transition from production of light trucks to more fuel-efficient cars.