The House of Representatives passed a $14 billion bailout for U.S. automakers yesterday after the White House and Democratic leaders finalized a deal empowering a government "car czar" to force the companies into bankruptcy by spring if they do not restructure. But the fate of the plan remained uncertain because of deep-seated Republican opposition in the Senate.
Supporters, including Bush administration officials, Democratic congressional leaders and many independent economists, warned that hundreds of thousands of jobs could be lost and hundreds of related businesses damaged or destroyed if one or more of the U.S. automakers failed.
"The consequences of defeating this bill would be disaster for the economy that is already in trouble," said Rep. Barney Frank, a Massachusetts Democrat.
The vote was 237-170, with 32 Republicans and 205 Democrats voting in favor of the bill.
The White House dispatched Vice President Dick Cheney, Chief of Staff Joshua B. Bolten and top economic adviser Edward Lazear to Capitol Hill to sell the deal, but they were barraged by questions during a two-hour, closed-door meeting and failed to secure much, if any, support, senators said.
"People are rightly concerned that the automakers and unions won't follow through. Many simply don't believe that the changes that need to be made will be made," said Sen. John E. Sununu, a New Hampshire Republican. He said Cheney, Bolten and Lazear had acknowledged that the bill was not as strong as they would have liked but urged Republicans to support it.
Many Republicans are weary of government bailouts and worry that providing money to automakers will lead other industries to seek aid. Many on Capitol Hill also believe that they should have attached more strings to the $700 billion Wall Street bailout.
A central goal of White House and congressional negotiators has been to design a bill tough enough on the Detroit automakers and United Auto Workers Union to pass muster in Congress.
"It's a bill that provides bridge financing to one of two possibilities ... fundamental restructuring or bankruptcy," said Joel Kaplan, White House deputy chief of staff for policy. "We wanted to make sure it was tough and that this was not a bridge financing to nowhere."
Days ago, negotiators slashed the $34 billion requested by the Big Three executives to a more modest stopgap fund just big enough to keep General Motors and Chrysler afloat until spring. Negotiators also agreed to create a federal monitor, appointed by the president, to oversee the companies' efforts to restructure their operations to ensure viability.
In the final stages of the negotiations, the presidentially appointed monitor was given authority to act as a de facto bankruptcy judge with great power over the operations and future shape of companies accepting government aid.
GM has said it needs $10 billion to make it until March 31, and Chrysler has asked for $4 billion. Ford has said it does not need emergency loans now.
If the restructuring plans do not meet standards set out in the bill for ensuring viability, the government would be required to recall a company's loan, which would almost certainly trigger bankruptcy. The plans must be submitted by March 31 - or by April 30 if the monitor agrees to a one-time extension because workable plans are nearing completion.
The legislation would prohibit any additional federal money to the automakers if they fail to come up with an acceptable restructuring plan but would open the door to longer-term U.S. financing if they do.
The auto czar also would have veto power over any transactions exceeding $100 million by the companies while the loans were outstanding. Washington would receive ownership stakes in the companies in exchange for the loans.
The bill contains a prohibition on stock dividends, restrictions on executive compensation and severance packages, and a requirement that companies receiving loans not own or lease private aircraft. GM supports the bill. Chrysler did not directly back the legislation but said it was encouraged by the progress.
Even with the tougher provisions, at least a half-dozen Senate opponents say they would prefer that the companies declare bankruptcy now and restructure afterward rather than get government help.
One of the leading opponents, Sen. Richard C. Shelby, an Alabama Republican, called the bill a "travesty" that would remove the incentive for the automakers to make major changes and lead to billions more in government money in the future.
"Unless Chrysler, Ford and General Motors become lean and innovative and competitive in the marketplace, this is only delaying their funeral," he said.