U.S. House Passes Auto Aid - Next up The Senate, Where Prospect Is Less Certain

WASHINGTON, December 10, 2008: According for Harry Stoffer, writing for Automotive News, the House of Representatives approved emergency U.S. aid for Detroit's automakers, setting up a showdown in the Senate where prospects for passage are less certain.

The legislation would provide an immediate $14 billion in loans to prevent the collapse of General Motors and Chrysler LLC and set the stage for government stakes in automakers and Washington-directed restructurings.

The Wednesday night House vote, 237-170 in favor, was expected.

"We are hastily reacting to very fast-moving events," said Rep. Barney Frank, D-Mass., at the outset of the House debate.

GM Statement on House Vote in Favor of H.R. 7321, Auto Industry Financing and Restructuring Act We thank the House and its leadership for their bipartisan vote to support America's domestic automakers at this most critical time for the nation's economy. The House vote brings us closer to saving jobs and to creating a more competitive U.S. auto industry in order to maintain America's economic vitality. We encourage the Senate to act soon so that we can continue at full speed on the restructuring and advanced technologies plans that will form a stronger, more viable GM.

Frank, chairman of the House Financial Services Committee and a coauthor of the bill, said he would have opposed letting the automakers go bankrupt at any time. But allowing that happen in the midst of a severe economic recession would be disastrous.

The legislation represents a negotiated compromise between Democratic leaders of Congress and the Republican White House, but GOP senators still could keep it from becoming law.

Sen. George Voinovich, R-Ohio, who favors industry aid, told reporters today that there wasn't enough Republican support to enact the measure. Some lawmakers said the bill may need to be revised yet again to win more Senate votes.

Sixty of 100 senators must agree to end debates on controversial measures. Democrats have a 50-49 advantage, including the two independents who side with them.

Senate Majority Leader Harry Reid, D-Nev., said he wanted to vote quickly, but opponents could delay final action from occurring until Saturday or Sunday.

If aid is provided, it would come with tight strings attached, reminiscent of restrictions placed on government loan guarantees in 1979 that kept the former Chrysler Corp. from failing.

Under the latest measure, the president would appoint an overseer, dubbed a car czar. He or she could compel automakers, their creditors, workers, suppliers and dealers to agree on restructuring for long-term viability -- or emergency loans would have to be returned.

The interest rate on loans would be 5 percent for the first five years and 9 percent thereafter. The bill would require repayment of government loans before any of a company's other debts.

It also would give taxpayers equity stakes in the automakers, prohibit payment of stock dividends, forbid ownership of corporate jets and set limits on executive compensation.

The auto czar would have authority to review -- and veto -- any automaker transaction valued at $100 million or more.

Massachusetts' Frank said that authority could be used to prevent plant closings or moving production overseas.

The bill sets a deadline of March 31 for completion of the restructuring agreements. The overseer, or president's designee as the bill calls him or her, could grant a one-month extension.

The czar could also impose his or her own restructuring plans, with the option of sending a company into bankruptcy reorganization.

Republican opponents complained that restructuring should occur before aid is provided.

Rep. David Dreier, R-Calif., said in the House debate that Americans are fed up with bailouts as they ask: "Where will this end?"