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Source: Reuters
Congress and the White House have buckled down to set terms for US automakers to receive up to $17 billion in short-term bailout loans on the condition the companies prove they can compete.
White House spokeswoman Dana Perino told reporters the assistance would only be considered for companies "willing to to make the difficult decisions across the scope of their businesses to be viable and competitive" and in cases where strong taxpayer protections could be guaranteed.
Faced with plummeting sales they blame largely on the credit crunch and recession, General Motors, Chrysler and Ford Motor Co sought $34 billion from Congress this week to forestall possible collapse.
Perino added that discussions had been "constructive" between the White House and leaders of both parties.
The Bush administration and congressional Democrats agreed late on Friday on the size of the planned rescue - $15 billion to $17 billion in bridge loans to carry them into spring.
They also cleared the biggest stumbling block with an agreement that the funding would come from an Energy Department loan program approved in September to help automakers make more fuel-efficient vehicles.
The impetus for the bailout breakthrough was an unexpectedly sharp downturn in US unemployment in November, which got lawmaker's attention out of fear thousands of US auto industry workers could soon be added to the rolls. Employers slashed more than 533,000 jobs last month, the highest monthly decline in 34 years.
The Detroit Three have long been weighed down by overcapacity, high healthcare and retirement expenses for workers and high operating costs, as well as eroding market share due to competition from healthier foreign rivals like Toyota Motor Corp.
Their slide accelerated in the second half of this year when record high gas prices undercut sales of bread-and-butter sport utility vehicles and pickups. Sales plummeted when the credit crunch exploded and recession worsened.
Chrysler chief executive Bob Nardelli told a congressional committee on Friday the company needs $4 billion to survive through March. His counterpart at GM, Rick Wagoner, said his company needs $10 billion over the same time frame.
Ford wants a $9 billion line of credit that would only be tapped if its finances deteriorate more than expected in 2009. Chrysler is also seeking more cash for operations into 2009 and GM wants a credit line as well.
Senior lawmakers hope next week to present a proposal for votes in both the House of Representatives and the Senate where there has been widespread scepticism about a bailout.
"Nothing is decided until all is decided," a congressional aide said in describing what other industry and political insiders predict will be challenging discussions on how to structure a bailout.
Republican Senator Bob Corker of Tennessee, a member of the Banking Committee, said he was disappointed in what he has seen of the plan so far. He has recommended sharp wage reductions and other tough medicine as a condition for aid.
Possible conditions centred limiting executive compensation, imposing strict loan repayment terms, and protections for taxpayer investment that might include an equity stake in a restructured company, lawmakers have said.
House Speaker Nancy Pelosi, a California Democrat, said on Friday the Energy Department funds must be replenished within weeks of withdrawal.
It is also possible, lawmakers and aides have said, to extend a very limited amount of aid with some conditions now and lay the groundwork for the next Congress and the new Obama administration to tackle a broader package next year.
The White House, which got its way in the funding source battle, has also insisted along with congressional leaders that the distressed companies prove they can be commercially viable in an industry battered by the credit crisis and recession.
Lawmakers from both parties criticized Detroit manufacturers at hearings this week for their slowness to innovate and are wary of staking taxpayer dollars on companies with bleak prospects.
Members floated possible bailout conditions, including some that would shrink the industry from three companies to two.
Some House and Senate Republicans have called for bankruptcy restructuring or bankruptcy like approaches that would force automakers to renegotiate labor, supplier and lender contracts without actually going to court.
Democrats like Sen. Charles Schumer of New York and a member of the leadership, proposed a trustee - or a "car czar" - to bring labor, bondholders, dealers and executives together quickly to hammer out concessions.
