$15 Billion Bailout Puts Car Czar In The Driver's Seat

Congress has sent the White House a short-term rescue plan for the auto industry. The idea is to make sure the car companies survive into next year, when they could get longer-term help. GM and Chrysler say they need billions of dollars to make it to the end of the year. The White House has been negotiating with congressional Democrats.

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STEVE INSKEEP, host:

It's Morning Edition from NPR News. Good morning, I'm Steve Inskeep.

RENEE MONTAGNE, host:

And I'm Renee Montagne. We're reporting this morning on businesses filing for bankruptcy and businesses straining to avoid it.

INSKEEP: The economy has struck everything from newspapers to a leading opera company, as we'll hear in a moment. We begin with two carmakers that say they need help to survive this year.

MONTAGNE: General Motors and Chrysler are both in trouble. Ford says it's healthier, but all three are seeking help. Now Congress and the White House are working on the terms of a rescue plan.

INSKEEP: Those negotiations include the possibility of a car czar who would oversee a restructuring of the car companies. NPR's Brian Naylor reports.

BRIAN NAYLOR: After committing $700 billion to the financial services industry with uncertain results, Democrats in Congress are now trying to come to the aid of struggling automakers, although if you listen to Senate Majority Leader Harry Reid, it's more out of a sense of obligation than enthusiasm.

Senator HARRY REID (Democrat, Nevada; Senate Majority Leader): The jobs of millions of American workers are at stake, along with the financial security of millions of families. So while we take no satisfaction in loaning taxpayer money to these companies, we know it must be done.

NAYLOR: Democrats have agreed to take $15 billion for the short-term loans from a fund that had been set aside to help carmakers retool to make more efficient vehicles. That was a concession to the White House, which insisted that the financial bailout money remain off limits to car makers. In return, the car makers must show they have a viable future in order to qualify for further assistance when the short-term money runs out. And there will have to be sacrifices, says House Speaker Nancy Pelosi.

Representative NANCY PELOSI (Democrat, California; Speaker of the House): We call this the barbershop. Everybody's getting a haircut here in terms of the conditions of the bill.

NAYLOR: Among those who will have to get trimmed, say Democrats, are management, shareholders, dealers and autoworkers. The CEOs of the Detroit Three testified last week their companies are in dire shape. Without $4 billion this month, GM executives say the nation's largest car maker won't make it into next year. Chrysler says it needs 7 billion now. Ford says it wants a standby line of credit in case the other companies fail.

As Democrats see it, the short-term loans would help the automakers survive into the spring, when a larger Democratic majority in Congress and a Democrat in the White House may be more sympathetic. Massachusetts Democrat Barney Frank says Congress has gone a long way to meeting White House demands.

Representative BARNEY FRANK (Democrat, Massachusetts; Chairman, House Financial Services Committee): We have been able to send them a bill that we believe, as we understand the conversations, meets what they think is necessary. So that if there is a real desire to get this thing done and prevent adding another disaster to our economic situation, we should have it.

NAYLOR: The legislation would set up an overseer to administer the loans and the company's implementation of their recovery plans - what's come inevitably to be known as a car czar. Pelosi vowed there would not be, in her words, an endless flow of money to the industry. Still, the measure is likely to be a tough sell in the Senate, where 40 Republicans could block it. Alabama's Jeff Sessions is a likely no vote. His state is home to a number of foreign-based car makers' plants, including Mercedes Benz and Hyundai. Sessions says the best thing domestic car makers could do is file for bankruptcy under Chapter 11.

Senator JEFF SESSIONS (Republican, Alabama): Once you start putting money in a sinking company, as any banker will tell you, they refer to it as putting good money after bad. The more money you put into a corporation, the deeper they got you. You're the one that is hooked. You're the one that's stuck now.

NAYLOR: According to a new CBS news poll, Americans are evenly divided over an auto industry bailout. Other surveys have shown less support for taxpayer dollars going to car makers. Democrats hope to have a bill the president will sign on his desk by week's end. Brian Naylor, NPR News, the Capitol.

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Congress, White House Near Auto Bailout Deal

House Speaker Nancy Pelosi speaks to reporters as Rep. Barney Frank looks on. i i

House Speaker Nancy Pelosi (D-CA), right, speaks to reporters Monday about the auto industry rescue plan as House Financial Services Committee Chairman Barney Frank (D-MA) looks on. Alex Wong/Getty Images hide caption

itoggle caption Alex Wong/Getty Images
House Speaker Nancy Pelosi speaks to reporters as Rep. Barney Frank looks on.

House Speaker Nancy Pelosi (D-CA), right, speaks to reporters Monday about the auto industry rescue plan as House Financial Services Committee Chairman Barney Frank (D-MA) looks on.

Alex Wong/Getty Images

Congressional Democrats and the White House on Tuesday are expected to finalize a $15 billion emergency loan package to help save millions of jobs connected to the nation's troubled auto industry.

Talks to prevent the collapse of General Motors Corp. and Chrysler LLC have intensified in recent days, with the broad outline of a plan emerging Monday. GM, Chrysler and Ford Motor Co. directly employ about 350,000 people, and millions of other workers depend on the industry.

Under the deal taking shape, GM and Chrysler would get emergency loans on Dec. 15. Then an overseer — a kind of "car czar" — would write guidelines, due on the first of the year, for restructuring the Big Three automakers. If the car companies haven't taken enough steps to reinvent themselves by Feb. 15, the overseer could recall the money.

The White House was seeking even tougher measures that would have allowed the car czar to force automakers into bankruptcy if they don't cut labor costs, restructure debt and downsize.

Congressional officials said Kenneth Feinberg, the lawyer who oversaw the federal Sept. 11 victims' compensation fund, is under consideration for the car czar post.

The Bush administration has maintained that any plan must include best efforts to guarantee that taxpayer dollars are paid back and that the automakers are able to reorganize and compete.

Deputy White House press secretary Tony Fratto said Tuesday, "We made progress and hope to continue making progress. We want to move quickly, but it's important that we get the policy right."

As the head of the United Auto Workers voiced fresh confidence that an agreement will be reached, House Speaker Nancy Pelosi (D-CA) told NBC's Today show that "it's very important" for the Big Three to be forced to change and not be "left to their own devices."

Pelosi said she thinks taxpayers should consider the plan "a second chance" for the industry — not a bailout.

UAW President Ron Gettelfinger, appearing on CBS's The Early Show, would not say whether his union would demand a seat on GM's board of directors in exchange for contract concessions. But he did say that "if we're going [to] be asked to give up more, and it appears that we are, then we should have an equity stake in the company."

Robert Lutz, GM's vice president of global product development, also appearing on CBS, said his company is ready to accept a federally appointed czar.

Despite optimism on both sides that Congress and the White House could reach a quick deal, it is still unlikely to be an easy sell on Capitol Hill.

"While we take no satisfaction in loaning taxpayer money to these companies, we know it must be done," Senate Majority Leader Harry Reid (D-NV) said. "This is no blank check or blind hope."

From wire reports

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