The White House
and congressional Democrats yesterday reached an "agreement in concept"
on a measure that would throw a government lifeline to the faltering
Detroit auto industry but require the auto giants, their workers and
creditors to quickly negotiate a plan to achieve profitability or face
the prospect of bankruptcy.
The agreement calls for the government to speed $15 billion in
emergency loans to the car companies as soon as next week, and for
President Bush
to immediately name a car czar to oversee the bailout. Under the
agreement, the car czar would be required to revoke the loans unless
the companies proved by March 31 that they were implementing a plan to
achieve "a positive net present value," according to a senior
administration official who spoke on condition of anonymity because
final language was still under discussion.
Under the measure, if the firms fail to make progress, the car czar
would be required to submit to Congress a new plan to restore them to
financial viability, the official said, including the option of Chapter
11 bankruptcy protection. If no plan for the long-term survival of the
companies were to emerge, the firms would be ineligible for any
additional federal assistance.
The official said the agreement would create "three very serious
sticks to ensure that this is truly what it was intended to be: bridge
financing for firms that have a plan and a path to become competitive,"
rather than becoming "the first in a number of interminable loans that
these guys can get to avoid making the hard choices."
The agreement cedes to the Bush administration its central demand
that the auto giants move immediately to make changes in their
operations or lose government funding. It would also ensure that the
car companies would be held to a tough standard after President-elect Barack Obama takes office.
Last night, the agreement was still being drafted into legislation,
which would be subject to review by both sides. But the official said
"there's an agreement on the concept and the way forward" between the
Bush administration and Democratic lawmakers.
House leaders said they would hold the first vote as soon as today.
Still unclear was whether the plan would be accepted by congressional
Republicans, whose support is crucial to pushing it through the closely
divided Senate. Yesterday, a growing list of Republicans voiced
opposition to the compromise.
Some Republicans said they were annoyed that they had been excluded
from the negotiations. Others raised more fundamental objections,
saying the plan didn't go far enough to compel the auto giants to make
painful changes in their operations and to ensure that taxpayers are
repaid. As the White House began working to shore up GOP support, Sen. John Ensign (R-Nev.) said he plans to use Senate rules to block the measure, which could delay a vote in the Senate until early next week.
"Unless major changes are made that I can be convinced of, it would
take a lot for me to move off where I am," said Ensign, who expressed
skepticism toward the idea of investing vast powers in an auto czar.
Senate Majority Leader Harry M. Reid (D-Nev.)
acknowledged the brewing battle in remarks on the Senate floor, but
vowed to press ahead, even if it means keeping senators in Washington
through the weekend. "We're going to have a vote on this sometime. We
can either have it sooner or we can have it later," Reid said. "We
cannot let a few people stop us from doing the people's business."
Until new members take office in January, Democrats have at best a
50-to-49 edge in the Senate, because of President-elect Barack Obama's
resignation. It was unclear yesterday whether Obama's vice president, Sen. Joseph R. Biden Jr.
(D-Del.), would cast a vote on the auto bill, meaning Democrats may
need as many as 11 GOP votes to prevail over filibuster threats. A
spokesman for Obama's pick for secretary of state, Sen. Hillary Rodham Clinton (D-N.Y.), said she would be available for the vote.
The legislative maneuvering came as Democratic negotiators and White
House officials were signing off on the final details of an agreement
to speed $15 billion in emergency loans to the car companies as soon as
next week -- less than half the $38 billion General Motors, Chrysler and Ford
had been seeking. The money is intended to keep GM and Chrysler afloat
through the end of March. Ford has said it does not expect to need the
money immediately.
Under the proposal, the government would get warrants for equity
equal to at least 20 percent of the loan it provides to each firm. Bush
would immediately name a car czar or trustee to manage the bailout and
set broad goals for the industry in January. By March 31, the companies
would be required to submit detailed proposals for cutting costs,
restructuring debt and producing fuel-efficient vehicles that can
succeed in the marketplace. Otherwise, the car czar could demand
immediate repayment of the loans, a move that would effectively force
the firms into bankruptcy.
In talks yesterday, Democrats bowed to the White House on a series
of key demands, including that the car czar be allowed less discretion
over whether to extend long-term government assistance to the car
companies. A senior Democratic aide said the measure was being
redrafted to make clear that the car czar would be required to recall
any federal loans or to deny additional government support to the
companies if they fail to meet certain benchmarks on the road to
financial solvency.
Democrats also agreed to increase the size of the investments, asset
sales or other transactions that must be reported to the car czar from
$25 million to $100 million. The provision is intended to prevent the
firms from using taxpayer dollars to make investments abroad, but the
Bush administration argued that the lower figure would amount to
"micromanaging," according to Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, whose staff was leading the talks for House Democrats.
Democrats kept a provision, opposed by the White House, that bars car
companies that accept federal cash from pursuing lawsuits against
California and other states trying to implement tailpipe emissions
standards that are tougher than the federal guidelines.
Republicans say the move would undercut the automakers' profits, but Sens. Dianne Feinstein (D-Calif.) and Bill Nelson
(D-Fla.) said yesterday in a letter to Reid that GM and Ford have laid
out business plans indicating that they already intend to exceed the
California fuel economy standards within the next few years.
The administration official warned that if the provision stays in the measure, "it will not succeed."
Democrats also were pressing to include a provision stating that if
the loans fail to save Chrysler from bankruptcy, the government could
recover its money from Cerberus Capital Management, the private-equity firm that owns 80 percent of Chrysler's stock.
The White House was balking at that idea, congressional aides said. But
even some Republicans are troubled by the possibility that public
dollars could wind up in Cerberus's well-capitalized hands.
Yesterday, Sen. Charles E. Grassley (R-Iowa)
said taxpayers should not pour cash into Chrysler if Cerberus was
unwilling to do so. Grassley also objected to an unrelated provision in
the developing measure that would enable transit agencies, such as the
Washington area Metro, to continue benefiting from a financial arrangement that amounts to a tax shelter for foreign institutions.
"Taken together, these issues are a one-two punch. They insult the
taxpayer by propping up tax evasion, and they insult every American
feeling the brunt of the economic crisis by putting tax dollars on the
line where private equity investors refuse to put any of their own
money at risk," Grassley said in a statement.
In a statement, Cerberus said that it had "worked tirelessly to
assist Chrysler" and would "continue to provide Congress with full
transparency as to its financials."
