House approves auto industry bailout

December 11, 2008
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, WASHINGTON, December 11 – The House of Representatives on Wednesday approved a 14-billion-dollar government lifeline for the teetering US auto industry, but the legislation now faces stiff Republican opposition in the Senate.

The Auto Industry Financing and Restructuring Act passed 237 to 170 following several hours of intense debate, and hours after Congressional leaders and the White House hammered out a bridge loan deal to rescue the Big Three automakers.

It now moves to the Senate, where stiffer Republican opposition in a chamber with a razor-thin Democratic majority threatens to put the brakes on the legislation.

At the conclusion of floor debate, House Speaker Nancy Pelosi said the legislation would serve as "a jumpstart for an industry and our country\’s economic health."

The bill "sets us on a new path to viability. It is a test. And we will soon see in a matter of weeks if the executive suites in Detroit are willing to make the choices" laid out in the legislation.

"We want to throw a lifeline for success. We do not intend to afford life support," she said, warning that auto industry bankruptcy would send US manufacturing "down into a deep pit."

In the most far-reaching intervention in US industry in years, the legislation calls for emergency government loans to the car companies within days to be overseen by a "car czar" appointed by outgoing President George W. Bush.

In return, automakers by March 31 would have to cut costs, settle debts and make other changes to show a path to economic viability or face possible bankruptcy.

The government could choose to revoke the loans if the companies fail to make progress, or could refuse further assistance after March 31 if the Big Three have no promising survival plan, officials said.

House Majority Leader Steny Hoyer said it was critical that the government bailout proceed.

"There is a great reluctance to directly assist carmakers," he said, stressing that "the impact on the economy would be very severe" if the industry collapsed.

"If we do nothing, we face the real threat that sometime soon there will be no American auto industry," he said during the House debate.

"That will not be good for our national security. It will not be good for our economic security. It will not be good for the psychology of our country."

The White House hailed the vote Wednesday night, with spokeswoman Dana Perino calling the bill "an effective and responsible approach to deal with troubled automakers and ensure the necessary restructuring occurs.

"We intend to continue to work in a bipartisan way in the coming days to achieve legislation that will lead to restructured and viable automakers, while protecting the taxpayer\’s interests," she added.

But the potential bailout immediately collided with serious Republican doubts that the jumpstart is anything more than a quick fix, and that the gap the companies face can be bridged.

Republican Congressman Tom Feeney nixed the bailout as a "short-term solution" that would merely drain federal coffers and strain taxpayers.

"Micro-managing a business from Washington is the supreme act of hubris. It will never work," he said on the House floor.

Influential House Financial Services Committee Chairman Barney Frank, one of the bill\’s architects, acknowledged the opposition in the Senate, where Democrats currently have 49 seats, plus two Independents who usually vote with the Democrats.

To overcome opposition Democrats will need at least 60 votes to pass the auto bill.

"We\’re about to see the great majority of Republicans deliver both orally and then by their votes a stunning vote of no confidence," Frank said.

"But not in the automobile industry, but the Bush administration," he added, noting that the bill was "brought forward in consultation with President Bush and his chief aides."

Republican Senate Majority Leader Mitch McConnell said Wednesday the rescue bill would be considered by the Senate by the end of the week.

The proposed short-term loans of 14 billion dollars (10.6 billion euros) are meant to sustain the car giants through March, allowing president-elect Barack Obama time to address the crisis after he takes office on January 20.

Obama has called a collapse of the auto industry "unacceptable," but said Sunday he wanted a supervisory process that would hold the companies\’ "feet to the fire."

GM and Chrysler are first in line, after warning they are fast running out of cash. Ford, though equally hampered by slumping sales, says it faces no immediate liquidity crisis but wants a nine-billion-dollar line of credit.

The auto giants had initially asked for more than twice as much — 34 billion dollars — to stave off a "catastrophic collapse."

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