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Strings almost certain to be attached to a Detroit bailout

The struggling U.S. auto industry would face demands from many sides if it got help from taxpayers.

November 14, 2008|Jim Puzzanghera, Richard Simon and Martin Zimmerman | Puzzanghera, Simon and Zimmerman are Times staff writers.

LOS ANGELES AND WASHINGTON — With pressure rising for the government to save U.S. automakers from the financial junkyard, the question is fast becoming: Should General Motors, Ford and Chrysler simply get infusions of tax dollars? Or, in exchange for the billions, should they be forced to accept sweeping changes that critics say are necessary for their competitiveness and survival?

Environmentalists want government mandates to shift Detroit's output to more fuel-efficient, lower-polluting vehicles. They also want the automakers to drop legal challenges to California's new vehicle emission standards.

"These chuckleheads got into this problem because they're refusing to make greener, more efficient vehicles, which is exactly what the California standards require," said David Bookbinder, the Sierra Club's chief climate counsel, who was drafting wording Thursday for legislation that that would force the automakers to abandon their lawsuits.

Other advocates are seeking new leadership in corporate boardrooms and executive suites, plus commitments to more competitive products.

Saving companies that have been poorly run is a waste of time and money, some critics say.

"It's time for new management and stringent conditions," said Rep. Jim Cooper (D-Tenn.), a member of the Blue Dogs, a group of fiscally conservative congressional Democrats. "It's Uncle Sam. It's not Uncle Sucker."

Democratic lawmakers have said they want "strong conditions" on any assistance to "maximize the potential for the industry's recovery." But they have provided few specifics as they craft a $25-billion emergency loan package. The money would come from the $700-billion financial rescue fund already passed by Congress, and would be in addition to $25 billion in loans approved this fall -- but not yet available -- to help automakers retool their factories to produce more energy-efficient vehicles.

House Financial Services Committee Chairman Barney Frank (D-Mass.), who is drafting the House legislation, will not include specific conditions beyond the now-standard limits on executive compensation and severance packages, spokesman Steve Adamske said. But the Senate may include some definitive requirements in its version.

Sen. Christopher J. Dodd (D-Conn.) suggested Thursday that Congress wait until after Barack Obama is sworn in as president in January to provide further help to the carmakers. "Right now, I don't think there are the votes," he said. But a spokesman for Senate Majority Leader Harry Reid (D-Nev.) said Reid would press ahead with the still-unwritten measure next week, when the heads of the Big Three U.S. automakers are scheduled to testify before Congress.

Industry supporters say adding tough conditions to aid could hamstring automakers further and put as many as 3 million jobs in jeopardy.

"The matter at hand is not the fuel efficiency of an automobile. It's that the consumer just doesn't want to buy any automobile right now," said Wade Newton of the Alliance of Automobile Manufacturers, which represents the Big Three, Toyota and some German carmakers.

Rebecca Lindland, an analyst with consulting firm IHS Global Insight, said adding conditions to an automaker bailout is "like saying that you're only allowed to use organic medicine. You need to use the medicine that's going to make you healthy."

One thing is clear: Any major overhaul of the industry is likely to stir political trouble in the short term and cost jobs in the long term. Congressional leaders are preparing for a showdown with the Bush administration, which has been reluctant to extend aid beyond the financial sector.

Key Republicans are demanding to know how Detroit would fix its problems if it received more government aid. "Why have the Democratic leaders of Congress been willing to provide this money without insisting that the companies receiving these federal dollars demonstrate to Congress and to taxpayers that they have a credible plan to strengthen their financial health?" House Minority Leader John A. Boehner (R-Ohio) said Thursday.

With Obama and other Democratic leaders talking about the need for U.S. automakers to produce more energy-efficient cars, the industry is bracing for a fight. As one Detroit columnist recently wrote, a bailout probably "will come with more strings than a loan from Tony Soprano."

General Motors Corp.'s financial condition is so dire that it says it needs federal help even before Obama takes office. Last week, GM reported a $2.5-billion loss for the third quarter and said it could run out of cash in the first half of 2009.

GM Chief Executive Rick Wagoner recently told Automotive News that in return for federal aid he was willing to accept limits on executive pay, offer the government preferred stock in the company and speed up the introduction of fuel-efficient vehicles.

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