The White House and Treasury Dept. said they are likely to help U.S.
automakers avert bankruptcy after Republican senators defeated a bill
late Thursday, Dec. 11, that would have provided $14 billion in
taxpayer loans to the companies.
Members of Congress and auto executives were meeting all day Friday
with White House officials to determine how much money will be released
to General Motors (GM) and Chrysler,
and on what timetable. Also, the Treasury, sources said, was also
working out what oversight rules will be needed as part of the rescue
package, and the other conditions the automakers and the auto-workers'
union will have to meet. GM and Chrysler are known to be close to
reaching their minimum levels of cash needed to sustain their
operations.
For weeks, Democratic senators have called on the White House to use
some of the $700 billion Wall Street bailout fund to make loans to GM
and Chrysler, and to provide a line of credit to Ford (F),
which is not in as dire financial shape as its two rivals. But the
White House told Congress the fund was not created for industries
outside of banks and financial-services companies.
After the auto-rescue bill died in the Senate
following weeks of data indicating rising unemployment, however, the
White House changed course. Another factor was the further decline in
stock prices Friday morning, which analysts attributed to the likely
bankruptcy of General Motors and Chrysler.
"Because Congress failed to act, we will stand ready to prevent an
imminent failure until Congress reconvenes and acts to address the
long-term viability of the industry," said Treasury spokeswoman Brookly
McLaughlin.
The Treasury Dept. has about $15 billion of uncommitted funds left
from the first $350 billion round of the Troubled Assets Relief
Program, or TARP, authorized by Congress. That means it could cover the
immediate needs of the auto companies without having to go to Congress.
GM has said it needs $4 billion this month to keep paying its bills,
and $12 billion total to get through to March.
A Breakdown over Wages?
Senate Minority Leader Mitch McConnell (R-Ky.) and Senator Bob
Corker (R-Tenn.) said Thursday night on the Senate floor that
negotiations broke down over the United Auto Workers' unwillingness to
agree to a date for certain active workers' wages and benefits to be
cut to match those of workers at non-union auto factories in the U.S.,
such as those of Toyota (TM) and Honda (HMC).
Senator Corker, who acted as a broker between the Republican caucus and
the UAW and automakers, said Friday: "I feel a sense of surrealness
today that we came so close to what would have been a landmark
agreement."
Corker said he had asked the UAW to agree to language that would
have made labor costs "competitive" with foreign-owned plants, and the
definition would have been certified by the next Labor Secretary.
Democratic senators would not have supported the language unless the
UAW agreed to it.
UAW President Ron Gettelfinger on Friday took issue with the
characterization that the talks broke down because of wages. "The wages
discussions were about politics in the Republican caucus," said the
union leader. Gettelfinger said he didn't want to get pinned down to
specific language in the bill over "parity" or "competitiveness"
because comparisons between Detroit and foreign automakers are
complicated by the benefits held by the vast pool of union retirees.
Even if the union gave in, Corker may not have been able to get the
deal passed. There may have been too much opposition no matter what the
union was willing to do. "Corker couldn't deliver the Senate even if
the UAW agreed," said Rep. Thaddeus McCotter (R-Mich.)
Negotiation Successes
The union, in negotiations with Corker on Thursday, agreed to take
half of $21 billion of future health-care and benefit payments owed to
it by the automakers in stock rather than cash. And they agreed to
negotiate wage "competitiveness" over the next three months. Big
investors and banks that hold automakers' bonds also agreed to accept a
70% writedown on the face value of their investments, and to take half
of the rest in stock.
The bill language gave authority to a government-appointed "car
czar," who would have had to certify the financial "viability" of the
automakers by Mar. 31, including wage competitiveness. But Republican
senators wanted specific language in the bill to address labor.
Gettelfinger said that tactic was designed to "pierce the heart of
organized labor."
Corker, despite his freshman status in the Senate, emerged as a
major player in negotiations during the past three weeks as he came to
favor a government-facilitated restructuring of the automakers instead
of having them reorganize under Chapter 11 bankruptcy.
Corker encouraged Treasury Secretary Henry Paulson to adopt as much
of the framework of the Senate bill as possible in granting the
automakers some of the Wall Street bailout funds. "What we put forth in
the bill, and nearly got a deal on, were loan covenants that the
Treasury Secretary could adopt by fiat," said the senator.
Details of how Treasury may help the automakers are expected to emerge over the next few days.
