By John Crawley and Donna Smith
November 14 2008
The U.S. Senate plans to take up a $25 billion bailout bill for distressed domestic automakers on Monday, but it remains unclear if proponents can muster the support necessary to pass the legislation.
Democratic Majority Leader Harry Reid of Nevada said on Friday that he “plans to press forward” with emergency aid to automakers and a plan to extend unemployment insurance, even though Republican backing is not assured.
Reid plans to begin debate on Monday and hopes the Senate will conduct procedural votes early in the week.
It will be difficult for Democrats to push through an auto bailout if minority Republicans object and throw up procedural roadblocks.
In a letter to Republican Minority Leader Mitch McConnell of Kentucky, Reid said the legislation was needed to protect millions of workers “at risk from the possible collapse” of carmakers and companies that depend on their business.
General Motors Corp, Ford Motor Co and Chrysler LLC are furiously lobbying for $25 billion in immediate bailout money to help them survive the industry’s worst financial crisis.
Analysts have warned that any government assistance, which they say is imperative for GM to survive through early 2009, would come at a significant cost to existing shareholders.
Sen. Debbie Stabenow, a Michigan Democrat and a leading architect of bailout strategy, told CNBC that failure of one or more of the domestic automakers would rock the nation’s manufacturing economy, already reeling from downsizing.
“What is being talked about now is bankruptcy,” Stabenow said.
GM, Ford and Chrysler have all said Chapter 11 bankruptcy restructuring is not an option.
On Thursday, Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said he did not see enough support in the Senate to approve any auto bailout now and would be hesitant to bring it up if there was a chance of failure.
Sen. Richard Shelby of Alabama, the top Republican on the Senate Banking Committee, said in an interview on MSNBC that a bailout would not help.
“It’s going to be money down a rat hole,” he said.
Detroit needs a plan and new models to reverse its sinking fortunes, he said.
Leaders in the House of Representatives have been working to craft legislation that would allow the Treasury Department to extend emergency assistance to Detroit under its $700 billion rescue program for the financial industry.
In return, the government likely would take an equity stake in the automakers and impose conditions, including limits on executive compensation.
The House would take up a bailout bill if it first clears the Senate. Congress is only expected to meet for a matter of days during its post-election session and will not reconvene until early January.
The White House does not favor using the Treasury’s rescue program to help automakers or other industries outside the financial sector.
Bush administration officials point to other steps Congress could take to help Detroit, including amendments to $25 billion of factory retooling loans approved in September to help the industry make more fuel-efficient cars.
Automakers do not favor that approach, saying the retooling assistance has too many strings attached and will be needed later anyway.
Auto bailout hearings are scheduled for Tuesday in the Senate and Wednesday in the House. The chief executives of GM, Chrysler and Ford are expected to testify.
(Editing by John Wallace)