Prospects uncertain for carmaker bailout

WASHINGTON - Senate Democratic leaders unveiled a $25 billion plan yesterday to help financially troubled U.S. automakers as Congress prepared for a showdown over expanding the government's role in shoring up the economy.

But with President Bush and many Republicans expressing skepticism, the prospects are uncertain at best for action before the lame-duck session of Congress ends - probably by the end of this week.

The bailout, in the form of emergency loans, is part of a $100 billion stimulus plan from Senate Democrats that includes aid to revenue-strapped states, extension of jobless benefits, funding for infrastructure projects, energy assistance to low-income families, and help for families at risk of foreclosure.

But the prospects are even dimmer for the stimulus proposals, and Senate Majority Leader Harry Reid (D., Nev.) said he would try to pass the automaker aid separately if the broader package failed. A vote could come tomorrow.

House Democrats last night released an outline of their own $25 billion loan package for the automakers, which includes some tougher oversight and executive-compensation provisions.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke met behind closed doors with leading House Democrats late yesterday to discuss government rescue efforts, including funds for the auto industry. Administration officials are resisting Democratic calls to divert funds from the $700 billion Wall Street rescue package to help automakers. The fund has been used to assist banks and insurance giant AIG.

White House spokeswoman Dana Perino said, "There's not an appetite in Congress, or in the administration, to open up the . . . funding for individual industries, because once you start down that road, it's a slippery slope to other industries that might say that they need help."

Contending that Detroit's crisis is moving too fast for delay, chief executives of General Motors, Ford and Chrysler, along with the president of the United Auto Workers union, are scheduled to appear before a Senate committee today.

President-elect Barack Obama and congressional Democratic leaders are pushing for the aid.

Reid, appealing for quick action, told colleagues, "We're seeing a potential meltdown in the auto industry with consequences that could impact directly upon millions of American workers and cause further devastation to our economy."

The Senate plan unveiled yesterday noted that 355,000 U.S. workers are directly employed by the auto industry, and 4.5 million more work in related industries. That doesn't count the one million retirees, spouses and dependents who rely on the firms for retirement and health-care benefits.

Under the Senate plan, the $25 billion in emergency loans would come from the $700 billion financial rescue fund approved by Congress last month, and would be available only to companies that have operated U.S. factories building automobiles or components for at least 20 years.

That provision would exclude many U.S. plants run by foreign automakers.

To get loans, companies would have to submit detailed plans on how they would use the money to ensure "long-term financial viability," stimulate U.S. production, and "pursue the timely and aggressive production of energy-efficient advanced technology vehicles." The money would come with limits on executive compensation and ban stock dividends until the loans were prepaid.

But instead of using the $700 billion financial rescue fund to help automakers, the White House has proposed removing limits on a $25 billion loan program approved by Congress last year to help Detroit retool factories to produce more fuel-efficient and environmentally friendly vehicles. Congressional Democrats say that would hurt U.S. automakers' efforts to become more competitive.

The $100 billion stimulus plan also includes a tax break for buying a car before the end of next year, $300 million for research to speed development of electric vehicles, and $1 billion to fund loan guarantees to encourage domestic manufacturing of advanced batteries that can power electric vehicles.

A growing number of lawmakers are seeking to impose their own conditions on auto-industry aid.

Sen. Bill Nelson (D., Fla.) said yesterday that the automakers should be required to increase the average fuel efficiency of their vehicles to 40 miles per gallon in 10 years or 50 m.p.g. by 2020, as well as increase production of electric, hybrid and alternative-fuel models.

"We've got to stop this kind of foot-dragging that has got them into the place that they're in," he said.

Sen. Jon Kyl (R., Ariz.) expressed little sympathy for automakers.

"They're in trouble for reasons that relate to their own decisions," he said, suggesting they might be better off seeking to restructure their operations, including labor contracts, under bankruptcy protection.

Sen. Arlen Specter (R., Pa.) said yesterday that the auto industry "is of enormous importance in our country," and that not to have it "would have very, very severe economic consequences."

But, he added, "the question that I would submit, and heard from my constituents: 'Who's next?' "

Today, Detroit auto company CEOs and the United Auto Workers union head will make their case for aid at a Senate Banking Committee hearing.