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Bumpy road for Detroit aid plan

AUTOS

Democrats propose $25 billion in loans, but Republicans and time are not on their side.

November 18, 2008|Jim Puzzanghera and Richard Simon | Simon and Puzzanghera are writers in the Times Washington Bureau.

WASHINGTON — Leading Democrats in Congress unveiled plans Monday to help financially troubled U.S. automakers with $25 billion in emergency loans as lawmakers prepared for a showdown over expanding the government's role in shoring up the economy.

But with President Bush and many Republicans expressing skepticism, the prospects are uncertain at best for action before the lame-duck session of Congress ends -- probably this week.

The bailout, in the form of emergency loans, is in addition to a $100-billion stimulus plan from Senate Democrats that includes aid to revenue-strapped states, extension of jobless benefits, funding for infrastructure projects, energy assistance to low-income families and help for families at risk of foreclosure.

But prospects are even dimmer for those additional stimulus proposals, and Senate Majority Leader Harry Reid (D-Nev.) said he would try to pass the automaker aid separately if the broader package failed. A vote could come Wednesday.

House Democrats on Monday night released their own $25-billion loan package proposal for the automakers, which included some tougher restrictions and conditions.

Both Democratic plans call for tapping the existing $700-billion Wall Street rescue package to help automakers.

Treasury Secretary Henry M. Paulson and Federal Reserve Chairman Ben S. Bernanke met behind closed doors with leading House Democrats late Monday to discuss government rescue efforts, including funds for the auto industry. Administration officials are resisting calls to use a portion of the $700-billion fund created to rescue the financial sector. The fund has already been tapped to assist banks and insurance giant American International Group Inc.

"There's not an appetite in Congress, or in the administration, to open up the . . . funding for individual industries, because once you start down that road, it's a slippery slope to other industries that might say that they need help," White House spokeswoman Dana Perino told reporters.

To make the argument that Detroit's crisis is moving too fast for delay, chief executives of General Motors Corp., Ford Motor Co. and Chrysler, along with the president of the United Auto Workers union, are scheduled to appear before a Senate committee today.

President-elect Barack Obama and congressional Democratic leaders are pushing for the aid.

"We're seeing a potential meltdown in the auto industry with consequences that could impact directly upon millions of American workers and cause further devastation to our economy," Reid told colleagues.

Under the Senate plan, the $25 billion in emergency loans would be available only to companies that have operated U.S. factories building automobiles or components for at least 20 years. That provision would exclude many foreign automakers with U.S. plants.

To get loans, companies would have to submit detailed plans on how they would use the money to ensure "long-term financial viability," stimulate U.S. production and "pursue the timely and aggressive production of energy-efficient advanced technology vehicles." The money would also come with limits on executive pay and a ban on stock dividends until the loans were repaid.

The House proposal was similar but would limit money to companies that have operated two or more auto manufacturing plants in the United States for the last 25 years. It also calls for the government to receive some stock options from the companies, and for tougher restrictions on executive compensation.

Instead of using the $700-billion financial rescue fund to help automakers, the White House has proposed easing rules on a $25-billion loan program approved by Congress last year to help Detroit retool factories so they can produce more fuel-efficient and environmentally friendly vehicles. Congressional Democrats say diverting that money would hurt U.S. automakers' efforts to become more competitive.

The $100-billion stimulus plan also includes a tax break for the purchase of a car before the end of next year, $300 million for research to speed development of electric vehicles and $1 billion to fund loan guarantees to encourage domestic manufacturing of advanced batteries that can power electric vehicles.

A growing number of lawmakers are seeking to impose conditions on auto industry aid.

Sen. Bill Nelson (D-Fla.) said Monday that the automakers should be required to increase the average fuel efficiency of their vehicles to 40 miles per gallon in 10 years or 50 miles per gallon by 2020, as well as increase production of electric, hybrid and alternative-fuel models.

"We've got to stop this kind of foot-dragging that has got them into the place that they're in," he said.

Sen. Jon Kyl (R-Ariz.), the second-ranking Republican in the Senate, expressed little sympathy for automakers.

"They're in trouble for reasons that relate to their own decisions," he said, suggesting they might be better off seeking to restructure their operations, including labor contracts, under bankruptcy protection.

--

richard.simon@latimes.com

jim.puzzanghera@latimes.com

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