Facing massive job losses, the White House and congressional Democrats are working to provide about US$15 billion in loans to prevent Detroit’s weakened auto industry from collapsing.
After yielding to US President George W. Bush on a key point, House Speaker Nancy Pelosi said the House of Representatives would consider legislation next week to provide “short-term and limited assistance” to the US auto industry while it undergoes “major restructuring.”
“Congress will insist that any legislation include rigorous and ongoing oversight to guarantee that taxpayers are protected and that resources are directed to ensure the long-term viability and competitiveness” of the industry, Pelosi said in a statement.
The legislation, which was being crafted this weekend, would act as a lifeline to General Motors Corp, Ford Motor Co and Chrysler LLC, while meeting demands from many skeptical lawmakers that Congress refrain from writing a blank check for the beleaguered industry.
Several officials in both parties said a key breakthrough on the long-stalled bailout came when Pelosi bowed to Bush’s demand that the aid come from a fund set aside for the production of environmentally friendlier cars.
The California Democrat spoke to White House chief of staff Josh Bolten during the day to signal her change in position, they said.
Pelosi said the billions of dollars that had been set aside to modernize plants to develop the green cars would be repaid “within a matter of weeks.”
Democrats said her hope was to include the funds in an economic recovery bill that lawmakers are expected to prepare for president-elect Barack Obama’s signature shortly after he takes office.
Officials in both parties also said the legislation would include the creation of a trustee or group of industry overseers to make sure the bailout funds were used by automakers for their intended purpose.
The funds are designed to last until March, giving the incoming Obama administration and the new Congress time to consider the issue anew.
The discussions came hours after the government reported that employers had slashed 533,000 jobs last month.
It was the worst single month’s job loss in 34 years.
Bush warned that at least one of the Big Three automakers might become a casualty of the severe economic crisis.
“I am concerned about the viability of the automobile companies,” Bush said.
Top executives from the Detroit automakers spent two consecutive days on Capitol Hill pleading for US$34 billion in loans to help it survive a severe economic downturn and steep drop in auto sales.
Painting a grim picture, GM and Chrysler said they needed a combined US$15 billion to help them maintain their operations through early next year.
Ford wants access to a line of credit of up to US$9 billion but said that it would only need it if market conditions deteriorate.
Chrysler CEO Bob Nardelli said on Friday that the company, which was rescued by US$1.5 billion in loan guarantees approved in 1979, would edge closer to bankruptcy if Congress failed to reach a compromise.
“For us, if we were denied the funds, it certainly would push us in that direction and possibly, even worse, to liquidation,” Nardelli said.
In a statement later on Friday, the company said: “Chrysler LLC is encouraged by the discussions as it appears we are making progress. We will continue to work with Congress and the administration on this important issue to ensure the future viability of our company.”
Detroit’s automakers employ nearly a quarter-million workers, and more than 730,000 others produce materials and parts for cars. If just one of the automakers should declare bankruptcy, some estimates put US job losses next year as high as 2.5 million.
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