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Fri, Dec 12, 2008 - Page 10 News List

House backs US auto industry bailout

EYES ON SENATE Republican opposition could derail the US$14 billion plan for the Big Three automakers, which sets a March 31 deadline for corporate restructuring

AFP , WASHINGTON

Lawmakers return to the floor of the US House of Representatives to vote on a US$14 billion bailout for the auto industry on Wednesday in Washington.

PHOTO: AP

The House of Representatives approved a US$14 billion government lifeline for the teetering US auto industry, but the proposal now faces stiff Republican opposition in the Senate.

The plan passed 237 to 170 late on Wednesday following several hours of intense debate, and after senior Democrats in Congress and the White House hammered out a bridge loan deal to rescue the Big Three automakers.

The bill now moves to the Senate, where strong Republican opposition in a chamber with a razor-thin Democratic majority threatens to derail the legislation.

The rescue funds for the bailout are to be drawn from a loan program set up previously to bankroll the development of fuel-efficient cars.

The initial plan called for up to US$15 billion but in the end lawmakers chose to leave some funds remaining in the loan program for use by smaller companies, US media reported.

At the end of floor debate, House Speaker Nancy Pelosi said the legislation would serve as “a jumpstart for an industry and our country’s economic health.”

The bill “sets us on a new path to viability. It is a test. And we will soon see in a matter of weeks if the executive suites in Detroit are willing to make the choices” laid out in the legislation, she said.

“We want to throw a lifeline for success. We do not intend to afford life support,” she said, warning that auto industry bankruptcy would send US manufacturing “down into a deep pit.”

In the most far-reaching intervention in US industry in years, The Auto Industry Financing and Restructuring Act calls for emergency government loans to the car companies within days to be overseen by a “car czar” appointed by US President George W. Bush.

In return, automakers by March 31 would have to cut costs, settle debts and make other changes to show a path to profitability or face possible bankruptcy.

The government could choose to revoke the loans if the companies fail to make progress, or could refuse further assistance after March 31 if the Big Three have no promising survival plan, officials said.

The White House hailed the vote on Wednesday night, with spokeswoman Dana Perino calling the bill “an effective and responsible approach to deal with troubled automakers and ensure the necessary restructuring occurs.”

But there were serious doubts voiced by Republicans, who warned the intervention was doomed and would only postpone a day of reckoning for the car companies and autoworkers’ union.

Republican Representative Tom Feeney slammed it as a “short-term solution” that would merely drain federal coffers and strain taxpayers.

“Micro-managing a business from Washington is the supreme act of hubris. It will never work,” he said on the House floor.

One of the bill’s architects, the influential House Financial Services Committee Chairman Barney Frank, acknowledged the extent of opposition in the Senate, where Democrats currently have only 49 seats, plus two Independents who usually vote with them.

To overcome that opposition and pass the auto bill Democrats need at least 60 votes.

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