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Obama Pushes for $50 Billion for Automakers, Oversight Czar

Matthew Benjamin and Julianna Goldman
Thu Nov 13, 12:01 am ET

Nov. 13 (Bloomberg) -- President-elect Barack Obama is pushing Congress this year to approve as much as $50 billion to save cash-starved U.S. automakers and appoint a czar or board to oversee the companies, a move that would require President George W. Bush's support, people familiar with the matter said.
Obama's economic advisers are now convinced that if General Motors Corp. doesn't get a financial lifeline soon, it will have to file for bankruptcy by the end of January. And if the companies don't get almost $50 billion, Obama will be dealing with the issue again by next summer.
Any czar or board would be patterned after the bailout of Chrysler in 1979 and New York City in 1975. Advisers such as former Federal Reserve Chairman Paul Volcker and former Treasury Secretary Lawrence Summers are said to be telling Obama that the cash is urgently needed now.
Congress would have to act in a lame-duck session that begins next week. Obama would need Bush's backing to pass such a sweeping and costly measure in part because Democrats don't have enough votes to force a floor vote or override a veto. Obama also would need strong support from auto-producing states such as Michigan, Ohio, Indiana, Illinois and Wisconsin to pass such a sweeping and costly measure.
Yet to be determined is whether most of the money would be drawn from the $700 billion financial rescue package Congress passed last month or from newly allocated funds.
Obama's Exception
By injecting himself into the talks about how to save General Motors, Obama is making an exception to his decision to steer clear of policy-making until he takes office.
The president-elect also wants the Federal Reserve to extend emergency loans to General Motors, Ford Motor Co. and Chrysler LLC, according to Obama aides who spoke on condition of anonymity.
The failure of those companies would likely bring down parts-makers, dealerships and suppliers in addition to inflicting a deep psychological blow.
If the plan were to offer no strong guarantees against layoffs it would likely draw fire from unions. But Obama advisers have been persuaded that the impact on current workers and retirees would be staggering if the companies went into bankruptcy.
Any auto czar or committee would presumably have the job of overseeing a restructuring of the auto industry.
`Too Big to Fail'
``The auto industry is too big to fail,'' said Nariman Behravesh, chief economist at IHS Global Insight Inc. in Lexington, Massachusetts. ``While the Obama administration can wait until Jan. 20 to address other matters, on this one they need to move quickly.''
Obama, 47, has repeatedly insisted there can only be ``one president at a time.'' He is sending two representatives, former Iowa Republican Rep. Jim Leach and former secretary of state Madeleine Albright to this weekend's economic summit of leaders of the Group of 20 nations in Washington rather than attend himself.
GM risks going bust before year-end without help from Washington. Shares of the biggest U.S. automaker reached a more than six-decade low this week. The company said last week it may run out of operating cash by the end of this year.
``We've not being prescriptive in what would be acceptable in terms of the loans,'' said GM spokesman Tony Cervone, who said he's not aware of the government's plans.
Chrysler spokesman Shawn Morgan said the company is in discussions with the Obama transition team and members of Congress.
``We look forward to a discussion addressing the immediate liquidity crisis facing the industry, as well as the competitiveness of the auto industry,'' Morgan said.
``We need to wait and see what comes from Congress,'' said Ford spokesman Mike Moran.
Bankruptcy Risk
Ford and Chrysler both likely would be forced into bankruptcy eventually if GM were to fail, Mark Oline, a Fitch Inc. credit analyst, said in an interview.
Enthusiasm among Obama's economic advisers for a concerted rescue for the auto industry was sparked at a Nov. 7 meeting in Chicago, according to person familiar with the meeting. Michigan Governor Jennifer Granholm also pressed for additional aid.
A GM bankruptcy could send the U.S. jobless rate as high as 9.5 percent, up from a 14-year high of 6.5 percent in October, and produce a recession comparable in length to that of 1980-82, according to Behravesh.
``If it does collapse, it could make the recession deeper and longer,'' he said.
Pressed Bush
Obama, an Illinois senator, pressed Bush on the urgency of an assistance package during their Nov. 10 meeting at the White House, Obama spokesman Robert Gibbs told reporters this week.
Still, the Bush administration so far has opposed bailing out the carmakers, and continues to resist the idea of using the Troubled Asset Relief Program, the bank rescue which Congress passed in early October, for any companies other than banks.
``The intent of the TARP was to deal with the financial industry,'' Treasury Secretary Henry Paulson, who is administering the program, said yesterday in a press conference. ``My focus is on the financial sector, getting credit going, getting lending going.''
Congressional Democrats, meanwhile, are pushing for legislation to help the automakers. House Speaker Nancy Pelosi called for congressional action, saying failure by one or more of the big U.S. automakers would have a ``devastating impact'' on the U.S. economy. Assistance must be conditioned on ``rigorous independent oversight'' of carmakers and restrictions on executive compensation, she said in a statement.
``A collapse of the American automobile industry would be the worst possible thing that could happen at a time when we are already weakened,'' Frank, a Massachusetts Democrat, said in an interview on Bloomberg Television.

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Pelosi outlines aid package for US automakers
By KEN THOMAS – 13 hours ago

Pelosi said the plan would call for "immediate, targeted assistance" and must include several principles, including the restructuring of the companies "to ensure their long-term economic viability," new fuel-efficiency standards, and the development of advanced vehicles.
She said it would include "even stronger limits on executive compensation and assurances to protect the taxpayer." House aides said the legislation was still being developed and a specific funding level had not yet been reached.
Pelosi did not mention any plans for the UAW to make any concessions as part of the legislation. UAW president Ron Gettelfinger told reporters earlier Saturday the problem is not the union's contract with the auto companies.
"The focus has to be on the economy as a whole as opposed to a UAW contract," Gettelfinger said. The union has said it made several concessions in its 2007 labor agreement, setting lower pay for new hires and placing retiree health care liability into a trust run by the UAW.
Facing an uphill battle in Congress and stiff opposition from President George W. Bush, supporters of the government bailout have considered reducing its $25 billion size. A House aide said Saturday that $25 billion was still the amount being discussed.

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Americans uneasy over bailout for automakers

By Matthew Bigg
Mon Nov 17, 4:31 am ET

ATLANTA (Reuters) – As Congress debates legislation to help struggling automakers on Monday, many Americans said they were uneasy with the plan, arguing that while it may save jobs, it would reward companies for pursuing bad business practices.
In interviews from New York to Los Angeles, everyday Americans said the proposed $25 billion rescue plan was unfair and said it would make it harder to reform U.S. automakers.
"They need to restructure. If they get bailed out they are not going to do it," said Eric Smith, a paint contractor interviewed in Chamblee, Georgia, on the outskirts of Atlanta.
Democrats crafted the plan to help General Motors Corp, Ford Motor Co and Chrysler LLC, and hope to pass it during a post-election session of Congress starting on Monday.
The three companies, whose gas-guzzling vehicles have been losing market share to Japanese rivals for years, are lobbying for the money to help them restructure and survive the economic downturn.
The stakes rose on Friday, when Goldman Sachs suspended its rating on GM and said the automaker needs at least $22 billion in aid. Goldman also said it would be difficult for Chrysler to survive without help.
All three companies said Chapter 11 bankruptcy restructuring was not an option.
In interviews, many people said all of the options facing the automakers had drawbacks, including the proposed bailout.
"If they don't do it, a lot of people are going to lose their jobs," said Kevin Austin, 36, while fixing a car in a mechanic shop in Atlanta.
"But every big company is getting a bailout and the little people don't," he said.
The automakers are a symbol of industrial muscle in the world's richest country and their financial straits are seen as a sign of the trouble facing the U.S. economy as a whole.
Even so, the bailout is unpopular with many conservatives and others who say in a capitalist society businesses must stand or fall with a minimum of government interference. On Sunday, Arizona Republican Sen. Jon Kyl told Fox News American taxpayers should not be burdened with bailing out the auto industry.
"It's like nature's law: Only the fit survive," said John Berrotto, 50, a security director in New York who drives a Lexus and said he does not support the idea of a bailout. "Sometimes companies just don't make it," he said.
DOUBTS
In Los Angeles, which hosts the Los Angeles Auto Show this week, many people said they doubted a bailout was the best course of action. Some said it might be better for the companies to go bankrupt. Others said the industry could not survive long-term and that the bailout would be throwing good money after bad.
"I'm not sure they (the automakers) can be salvaged. Part of me says that if Honda and Toyota can make better cars in the U.S. with American workers, so be it," said Tom Reiter, who was interviewed in Los Angeles and drives a 2001 Jaguar XJ he said was a "big gas guzzler."
Scott Porter, a 34-year-old attorney, drives a 1996 Honda Accord, which he said he chose for its reliability. He said he opposed the bailout but might be willing to consider it if it was done the right way.
"Everybody is trying to claim they're poor. Everybody wants a handout. This (financial trouble) is something that's been a long time coming," Porter said in downtown Los Angeles.
"I don't see why it's a massive emergency all of a sudden," Porter said, adding that many other sectors were also in trouble.
Asked about claims by U.S. automakers that they could not make a profit manufacturing small cars, he said: "If you can't make a profit then you are going to go bankrupt."
(Reporting by Matthew Bigg; Additional reporting by Dan Whitcomb in Los Angeles and Rebekah Kebede in New York; Editing by Eddie Evans)

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Aid prospects darken for desperate US carmakers
Monday November 17, 11:33 pm ET
By Julie Hirschfeld Davis, Associated Press Writer

Auto bailout prospects darken as GOP, Democrats clash; automakers say they're desperate
WASHINGTON (AP) -- Prospects dimmed on Monday for the $25 billion bailout that U.S. automakers say they desperately need to get through a bleak and dangerous December.
Though all sides agree that Detroit's Big Three carmakers are in peril, battered by the economic meltdown that has choked their sales and frozen loans, the White House and congressional Democrats are headed for stalemate over how much government money should go toward helping them.

Behind the logjam is a troubling reality for the car companies: Bailout fatigue has set in at the White House and on Capitol Hill, where many in both parties have spent the past few weeks being berated by constituents for agreeing to the $700 billion Wall Street rescue.

The new debate comes as the financial situation for General Motors Corp., Ford Motor Co. and Chrysler LLC grows more precarious. GM has said it could run out of cash by year's end without government aid.

A Senate auto bailout bill unveiled Monday noted that 355,000 U.S. workers are directly employed by the auto industry, and an additional 4.5 million work in related industries. That doesn't count the 1 million retirees, spouses and dependents who rely on the companies for retirement and health care benefits.

Still, not only has President George W. Bush made it clear he doesn't want to dole out any new aid for the automakers, congressional officials say his administration has privately informed top Democrats it won't even use at least half of that huge rescue fund approved last month to aid the financial industry.

The Senate Democrats' measure would carve out a portion of the Wall Street bailout money to pay for loans to U.S. automakers and their domestic suppliers, but aides in both parties and lobbyists tracking the plan privately acknowledge they are far short of the votes to pass it.

Republicans insist that any automaker bailout money instead come from redirecting a $25 billion loan program approved by Congress in September to help the industry develop more fuel-efficient vehicles. The GOP would lift restrictions on that money to speed it to the carmakers.

Democrats want to leave that money alone and give the industry an additional $25 billion from the financial bailout funds -- for a total of $50 billion.

Senate Majority Leader Harry Reid, D-Nev., said he would hold a vote during this week's postelection session on a bill that pairs the auto industry bailout with an extension of jobless aid. But in an acknowledgment of the long odds facing such a plan, Reid also laid the groundwork for a straight up-or-down vote on the more widely supported unemployment measure, which is probably all that can pass this week.

House Speaker Nancy Pelosi, D-Calif., has held off scheduling a vote on an auto bailout bill until it becomes clear whether such a measure can pass the Senate, where it would need a 60-vote supermajority to advance.

The Senate's proposed auto aid bill would provide loans with initial interest rates of 5 percent in exchange for a stake in the companies or warrants that would let the government profit from future gains. Loan applicants would have to give the government a plan for "long-term financial viability."

But the measure stops short of giving the government a say over the companies' operations through an oversight board or hard limits on executive compensation. While taking advantage of the program, the companies could not pay dividends or award bonuses to executives making more than $250,000 a year or give large "golden parachute" payments to top people.

A House version drafted by Rep. Barney Frank, D-Mass., goes further, requiring that U.S. automakers immediately repay the loans next spring if they don't give the government an acceptable restructuring plan that shows they can survive, including details on how they will transition to making vehicles that use less gasoline.

"(W)e think it essential that loans be linked to significant progress in the ability of the companies to eventually market energy-efficient cars with broad public appeal," Frank, the Financial Services Committee chairman, said in a statement Monday night.

Unlike the Senate measure, the House plan would be limited strictly to Detroit's Big Three.

A vote on the Senate measure could come as early as Thursday.

The White House, meanwhile, took pains to clarify its position on the bailout, saying the administration "does not want U.S. automakers to fail." But press secretary Dana Perino said the administration steadfastly opposes "raiding" the $700 billion bailout plan to help Detroit.

"We're surprised that Senate Democrats would propose a bailout that fails to require auto makers to make the hard decisions needed to restructure and become viable," Perino said in a statement.

President-elect Barack Obama has said he believes aid for U.S. carmakers is needed, but he hasn't specified where it should come from. He says the money should come as part of a long-term plan for the industry.

Sen. Carl M. Levin, D-Mich., who crafted the Senate Democrats' bill and spoke with Obama Monday, said the president-elect has "not signed off on any particular language or any particular approach" but generally backs loans to the struggling auto industry.

With all sides agreeing something should be done, Levin said, "There's a reasonably good chance that we can get this done this week."

The chief executives of the Detroit auto companies and the head of the United Auto Workers union are to make their case for the aid Tuesday at a Senate Banking Committee hearing. The House Financial Services panel is to hold a similar session Wednesday.

But the package is a tough sell to the public. In a Gallup Poll conducted Nov. 7-9, only 20 percent said providing loans and other help to auto companies should be a top economic priority for Obama. Given five choices, aid to the auto industry tied with assistance for large financial institutions as least-favored options.

Most -- 60 percent -- said enacting stricter regulations for financial institutions should be a No. 1 goal. About half named helping homeowners, about the same number supported cutting taxes for the middle class, while a third cited a new economic stimulus package.

"The automobile industry, obviously, is of enormous importance in our country, and not to have the automobile industry would have very, very severe economic consequences," said Sen. Arlen Specter, R-Pa. But, he added, "The question that I would submit, and heard from my constituents: 'Who's next?'"

Some top Republicans are against any additional federal automaker help, no matter where it comes from.

"There's no indication that the car companies would do anything different than what they've been doing, which has been a big failure, which is why they need the bailout. And there's no reason to throw money at a problem that is not going to get solved," said Sen. Jon S. Kyl of Arizona, the No. 2 Republican..........Aid prospects darken for desperate US carmakers
Monday November 17, 11:33 pm ET
By Julie Hirschfeld Davis, Associated Press Writer
Auto bailout prospects darken as GOP, Democrats clash; automakers say they're desperate
WASHINGTON (AP) -- Prospects dimmed on Monday for the $25 billion bailout that U.S. automakers say they desperately need to get through a bleak and dangerous December.
Though all sides agree that Detroit's Big Three carmakers are in peril, battered by the economic meltdown that has choked their sales and frozen loans, the White House and congressional Democrats are headed for stalemate over how much government money should go toward helping them.

Behind the logjam is a troubling reality for the car companies: Bailout fatigue has set in at the White House and on Capitol Hill, where many in both parties have spent the past few weeks being berated by constituents for agreeing to the $700 billion Wall Street rescue.

The new debate comes as the financial situation for General Motors Corp., Ford Motor Co. and Chrysler LLC grows more precarious. GM has said it could run out of cash by year's end without government aid.

A Senate auto bailout bill unveiled Monday noted that 355,000 U.S. workers are directly employed by the auto industry, and an additional 4.5 million work in related industries. That doesn't count the 1 million retirees, spouses and dependents who rely on the companies for retirement and health care benefits.

Still, not only has President George W. Bush made it clear he doesn't want to dole out any new aid for the automakers, congressional officials say his administration has privately informed top Democrats it won't even use at least half of that huge rescue fund approved last month to aid the financial industry.

The Senate Democrats' measure would carve out a portion of the Wall Street bailout money to pay for loans to U.S. automakers and their domestic suppliers, but aides in both parties and lobbyists tracking the plan privately acknowledge they are far short of the votes to pass it.

Republicans insist that any automaker bailout money instead come from redirecting a $25 billion loan program approved by Congress in September to help the industry develop more fuel-efficient vehicles. The GOP would lift restrictions on that money to speed it to the carmakers.

Democrats want to leave that money alone and give the industry an additional $25 billion from the financial bailout funds -- for a total of $50 billion.

Senate Majority Leader Harry Reid, D-Nev., said he would hold a vote during this week's postelection session on a bill that pairs the auto industry bailout with an extension of jobless aid. But in an acknowledgment of the long odds facing such a plan, Reid also laid the groundwork for a straight up-or-down vote on the more widely supported unemployment measure, which is probably all that can pass this week.

House Speaker Nancy Pelosi, D-Calif., has held off scheduling a vote on an auto bailout bill until it becomes clear whether such a measure can pass the Senate, where it would need a 60-vote supermajority to advance.

The Senate's proposed auto aid bill would provide loans with initial interest rates of 5 percent in exchange for a stake in the companies or warrants that would let the government profit from future gains. Loan applicants would have to give the government a plan for "long-term financial viability."

But the measure stops short of giving the government a say over the companies' operations through an oversight board or hard limits on executive compensation. While taking advantage of the program, the companies could not pay dividends or award bonuses to executives making more than $250,000 a year or give large "golden parachute" payments to top people.

A House version drafted by Rep. Barney Frank, D-Mass., goes further, requiring that U.S. automakers immediately repay the loans next spring if they don't give the government an acceptable restructuring plan that shows they can survive, including details on how they will transition to making vehicles that use less gasoline.

"(W)e think it essential that loans be linked to significant progress in the ability of the companies to eventually market energy-efficient cars with broad public appeal," Frank, the Financial Services Committee chairman, said in a statement Monday night.

Unlike the Senate measure, the House plan would be limited strictly to Detroit's Big Three.

A vote on the Senate measure could come as early as Thursday.

The White House, meanwhile, took pains to clarify its position on the bailout, saying the administration "does not want U.S. automakers to fail." But press secretary Dana Perino said the administration steadfastly opposes "raiding" the $700 billion bailout plan to help Detroit.

"We're surprised that Senate Democrats would propose a bailout that fails to require auto makers to make the hard decisions needed to restructure and become viable," Perino said in a statement.

President-elect Barack Obama has said he believes aid for U.S. carmakers is needed, but he hasn't specified where it should come from. He says the money should come as part of a long-term plan for the industry.

Sen. Carl M. Levin, D-Mich., who crafted the Senate Democrats' bill and spoke with Obama Monday, said the president-elect has "not signed off on any particular language or any particular approach" but generally backs loans to the struggling auto industry.

With all sides agreeing something should be done, Levin said, "There's a reasonably good chance that we can get this done this week."

The chief executives of the Detroit auto companies and the head of the United Auto Workers union are to make their case for the aid Tuesday at a Senate Banking Committee hearing. The House Financial Services panel is to hold a similar session Wednesday.

But the package is a tough sell to the public. In a Gallup Poll conducted Nov. 7-9, only 20 percent said providing loans and other help to auto companies should be a top economic priority for Obama. Given five choices, aid to the auto industry tied with assistance for large financial institutions as least-favored options.

Most -- 60 percent -- said enacting stricter regulations for financial institutions should be a No. 1 goal. About half named helping homeowners, about the same number supported cutting taxes for the middle class, while a third cited a new economic stimulus package.

"The automobile industry, obviously, is of enormous importance in our country, and not to have the automobile industry would have very, very severe economic consequences," said Sen. Arlen Specter, R-Pa. But, he added, "The question that I would submit, and heard from my constituents: 'Who's next?'"

Some top Republicans are against any additional federal automaker help, no matter where it comes from.

"There's no indication that the car companies would do anything different than what they've been doing, which has been a big failure, which is why they need the bailout. And there's no reason to throw money at a problem that is not going to get solved," said Sen. Jon S. Kyl of Arizona, the No. 2 Republican.........http://biz.yahoo.com/ap/081117/congress_autos.html

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we all need to support the president and if you arent doing that you are a traiter to the nation so watch your back -you dont have the votes

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Congress debating auto industry bailout
Zachary Coile, Chronicle Washington Bureau
Monday, November 17, 2008

(11-17) 04:00 PST Washington --

The future of the U.S. auto industry is on the line this week, as Congress debates whether to pass a $25 billion loan package aimed at keeping the struggling Big Three Detroit automakers afloat.

Democrats are pushing a measure that could force the Bush administration to tap into the $700 billion Congress approved to rescue Wall Street and offer automakers a loan in return for an equity stake. President-elect Barack Obama is putting his weight behind the effort, saying that auto giants like General Motors are too crucial to the U.S. economy to be allowed to fail.

The White House opposes the proposal, and many Republicans say Congress shouldn't intervene to help companies that have been mismanaged and may be headed for bankruptcy whether or not they get a bailout.

"They're a dinosaur in a sense," Sen. Richard Shelby, R-Ala., said Sunday on NBC's "Meet the Press." "I hate to see this because I would like to see them become lean and hungry and innovative. And if they did and put out the right products they could survive. But I don't believe that the $25 billion they're talking about will make them survive. It's just postponing the inevitable."

All three U.S. automakers are in dire straits, especially General Motors, which has warned that it may run out of cash before the end of the year unless Congress steps in. If General Motors files for bankruptcy, many analysts believe Ford Motor Co. and Chrysler would not be far behind.

"We're on a cliff here," Ron Gettelfinger, president of the United Auto Workers, said this weekend, warning that the industry needs a bridge loan now before General Motors slips into bankruptcy. "Would you buy a car from a bankrupt automaker? We don't see bankruptcy as a viable option."

emocrats want strings

Democrats hope to tie the auto rescue package to an extension of unemployment benefits for dismissed workers. While the measure could pass the House, Democrats need the support of at least a dozen Republicans in the Senate in order to pass the measure, which even its proponents say is unlikely.

"It may not happen," acknowledged Rep. Barney Frank, D-Mass., chair of the House Financial Services Committee. But he added, "There's no downside to trying."

Automakers have been hit hard by the economic downturn as consumers put off purchases of big-ticket items, and the credit crunch has made it difficult for would-be buyers to get car loans. But the Big Three are also struggling from years of bad management decisions, heavy labor and health care costs, and a failure to keep pace with consumer trends - such as the growing demand for hybrid vehicles like Toyota's top-selling Prius.

Critics have raised strong objections to the bailout, saying it amounts to taxpayers propping up failing businesses - with no guarantee that it will save the automakers long-term. Conservatives also warn that it could encourage other struggling firms, such as airlines or retailers, to seek a federal handout.

"This is just a beginning of corporate welfare in a big, big way," Shelby said.

Supporters of the auto rescue plan say it could help stabilize the Big Three while waiting for consumer demand for vehicles to rebound. European automakers are also requesting $56 billion in temporary support.

"This is a national problem," said Sen. Carl Levin, D-Mich., co-chair of the Senate auto caucus. "We've got at least 3 million jobs dependent on this industry's surviving. This is a Main Street problem."

A report by IHS Global Insight Inc., a financial forecasting group, predicted that the bankruptcy of General Motors could push the U.S. unemployment rate as high as 9.5 percent from the current 6.5 percent, which might cost taxpayers an additional $200 billion in jobless benefits and other costs.

Obama, said on CBS's "60 Minutes" that the collapse of the U.S. auto industry "would be a disaster in this kind of environment." He said he supported extending a temporary bridge loan, but he said "it can't be a blank check."

"My hope is that over the course of the next week, between the White House and Congress, the discussions are shaped around providing assistance but making sure that that assistance is conditioned on labor, management, suppliers, lenders, all of the stakeholders coming together with a plan - what does a sustainable U.S. auto industry look like?" Obama said.

Democrats insist their plan would put conditions on the companies in return for the loans. House Speaker Nancy Pelosi said Saturday that to qualify, automakers would have to commit to producing more fuel-efficient vehicles using new technologies, and craft a new restructuring plan to "assure the long-term viability of the industry."

Detroit has already been offered one lifeline: Last year, as part of a deal to raise fuel economy standards, Congress authorized $25 billion in loans to help automakers retool to make more fuel-efficient vehicles.

hite house position

The White House, which opposes using money from the financial bailout program, wants instead to see Congress loosen the rules on the existing $25 billion loan package and allow automakers to tap into the money more quickly.

Republicans are raising questions about the cost of the Democrats' plan. Senate Minority Leader Mitch McConnell, R-Ky., said last week, "We owe it to the people of Nevada, Kentucky, and all across America to make known the impact this bailout would have on the deficit."

Some conservatives suggest the best course would be to allow General Motors and other automakers to head into bankruptcy, which would void their union contracts and allow them to slash the size of their operations and cut costs. A bailout "would hinder the long-overdue restructuring" of the industry, said Dan Mitchell, an economist at the libertarian Cato Institute.

Supporters of the Big Three warn that bankruptcy would be the death knell of the companies, because consumers would worry that the firms' and their dealers wouldn't be around in the future to service their cars. A survey by CNW Marketing found that 80 percent of consumers would shift to a different company if an automaker filed for bankruptcy.

But Levin, a strong ally of Michigan automakers, said Sunday that Congress could pressure top executives, such as General Motors CEO Richard Wagoner, to step down as a condition of receiving federal aid.

"If it was the difference between getting this support or not, obviously the management should consider resigning," Levin said.

Detroit lawmakers point to figures suggesting that 1 in 10 U.S. jobs is tied to the auto industry. The Center for Automotive Research in Ann Arbor, Mich., estimates that the failure of a U.S. automaker would lead to 2.5 million job losses, many at auto dealerships and parts suppliers.

Sen. Debbie Stabenow, D-Mich., on MSNBC's "Hardball" this weekend, pointed out that the federal government has already spent $150 billion to save an insurer, AIG, as part of its rescue of Wall Street.

"Certainly if they can do that for an insurance company, we can do $25 billion that will help keep 3 million people working in this country," she said.

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Auto aid plan heads for defeat as Big Three teeter
By JULIE HIRSCHFELD DAVIS, Associated Press Writer Julie Hirschfeld Davis, Associated Press Writer 2 hrs 4 mins ago

WASHINGTON – A Democratic Congress, unwilling or unable to approve a $25 billion bailout for Detroit's Big Three, appears ready to punt the automakers' fate to a lame-duck Republican president.

Caught in the middle of a who-blinks-first standoff are countless manufacturing firms and auto dealers — and millions of Americans' jobs.

For now, with the plan headed for a roadblock in the Senate, lawmakers in both parties are engaged in a high-stakes game of chicken, positioning to blame each other for the failure.

"The Congress need do nothing" during its postelection session this week, Sen. Harry Reid, D-Nev., the majority leader, said Wednesday, although he also said he still hoped lawmakers could strike an elusive deal to carve $25 billion in new auto industry loans out of the $700 billion Wall Street rescue fund.

But it's really up to President George W. Bush's team to act, he said.

"If we can't do it here legislatively, I would hope that the secretary of Treasury would listen loud and clear, because they could take this into their own hands and do what I think is appropriate," the Democratic leader said.

Not our responsibility, countered the White House.

"If Congress leaves for a two-month vacation without having addressed this important issue ... then the Congress will bear responsibility for anything that happens in the next couple of months during their long vacation," said Dana Perino, the White House press secretary.

She said there was "no appetite" in the administration for using the financial industry bailout money to help auto companies.

The White House and congressional Republicans instead called on Democrats to sign on to a GOP plan to divert a $25 billion loan program created by Congress in September — designed to help the companies develop more fuel-efficient vehicles — to meet the auto giants' immediate financial needs.

GOP Sens. Kit Bond of Missouri and George V. Voinovich of Ohio were at work on that measure Wednesday, toiling to placate skeptical Democrats by including a guarantee that the fuel-efficiency loan fund would ultimately be replenished.

"It is the only proposal now being considered that has a chance of actually becoming law," said Republican leader Mitch McConnell of Kentucky.

But there was little sign that Democratic leaders would go along. They are vehemently opposed to letting the car companies tap that money — set aside to help switch to vehicles that burn less gasoline — for short-term cash-flow needs.

All of which leaves the Big Three bracing for a bleak winter without government help. General Motors Corp. has said it could collapse within weeks, and there are indications that Chrysler LLC might not be far behind.

GM CEO Rick Wagoner told a House committee Wednesday that the downfall of his industry could lead to a loss of 3 million jobs within the first year and ripple through communities around the nation.

In sometimes contentious testimony, Wagoner was pressed on when GM would run out of money if the loans weren't extended.

He wouldn't say precisely, but disclosed that the company now was burning through "$5 billion each month."

Still, with the $25 billion emergency package, "we think we have a good shot to make it through this," Wagoner said.

Many lawmakers in both parties, however, are now openly discussing whether bankruptcy might be a better option for auto firms they regard as lumbering industrial dinosaurs that have done too little to adjust their products and work forces for the 21st century.

The carmakers argue that bankruptcy would devastate their companies, but proponents say it would give them a chance to reorganize and emerge stronger and more competitive.

It's unclear, though, whether Democrats controlling Congress are willing to risk being blamed for letting one of the Big Three — symbols of the nation's once-mighty manufacturing sector — go under.

Bailout-shy lawmakers got an earful from jittery constituents last month when the House let an early version of the Wall Street rescue fail, sending the Dow Jones industrials tumbling and erasing more than a trillion dollars in retirement savings and other investments. Congress took a deep breath and reconsidered, passing the plan a few days later.

Faced with a similar collapse in the auto industry, the Bush administration might yet decide to use its authority under the $700 billion financial industry bailout to help the auto companies, or the Federal Reserve could step in — though both have steadfastly refused to do so.

If not, lawmakers have left themselves a contingency plan: Come back to Washington in December for yet another postelection session where they might be able to strike the deal that now seems beyond reach.

Democratic leaders are planning to gather for an economic conference the week of Dec. 8, noted House Majority Leader Steny H. Hoyer, D-Md.

"That is available," Hoyer said this week. "The year has not ended."