Junior senator takes the wheel in U.S. auto aid

WASHINGTON (Reuters) - Bob Corker, a first-term Republican senator, proposed on Thursday adding tougher conditions to a $14 billion auto bailout to win enough Senate votes to pass a controversial package supported by Democratic leaders and the White House.

The junior Tennessee senator's proposal to amend a bill passed by the U.S. House of Representatives won the immediate backing of Senate Republican Leader Mitch McConnell, who said the existing bailout legislation "isn't nearly tough enough."

But it remained unclear whether Corker's idea to set a strict March 15 deadline for General Motors Corp and Chrysler to cut their debt, persuade bondholders to accept an equity swap and start labor renegotiations would help the legislation's chance of success. Some Democrats viewed his proposal as too hard on the United Auto Workers union.

The auto bailout bill needs 60 votes to advance in the Senate, where Democrats hold 50 seats, meaning that Senate Republicans could block the measure.

Corker, 56, said he could not support the existing auto bailout package because it did not address "the unworkable capital and labor structures that cripple these companies." The House version of the bill is as complicated as a "three-humped camel," he added in a Southern drawl.

Corker, a multimillionaire and founder of a successful construction and real estate company, emerged as a central player in the debate over whether to throw GM and Chrysler the lifeline needed to pay their bills over the next few weeks.

On Thursday, Corker said he had just spoken with GM's chief operating officer, who agreed that the senator's proposal would work by using a "government stick" to force the autoworkers to cut their debt and get workers' pay on parity with foreign competitors.

"Let's pass a bill that causes these companies to be strong, gives them the money to breathe," Corker said.

A member of the Senate Banking Committee, Corker asked tough questions of the Detroit chief executives at a hearing last week, chiding them for failing to evolve a dinosaur industry and pushing for Chrysler and GM to reopen merger talks. He also described phone conversations he held with Detroit auto executives, labor union officials and with the board of Chrysler's private equity firm owner, Cerberus Capital Management.

Tennessee, the senator's home state, includes a GM plant, a Nissan Motor Co plant and is getting a plant from Volkswagen, Europe's largest carmaker, Corker said.

Corker, a former mayor of Chattanooga, specifically proposed the following changes to the auto rescue package:

* Immediately provide the federal funds that General Motors and Chrysler have requested to keep them out of bankruptcy, but with "covenants."

* Require that GM and Chrysler reduce their outstanding unsecured debt by at least two-thirds by March 15, 2009, or be forced to file for Chapter 11 bankruptcy on March 15.

* Require that GM and Chrysler force their bondholders to accept an equity swap or debt for debt and equity swap.

* Require the UAW to take action to reduce labor costs only after the UAW sees the bondholders take a haircut.

* Require the UAW to convert half of payments from the UAW-aligned trust fund known as a voluntary employee beneficiary association (VEBA) into equity payments.

* Require that the "all-in" labor costs and work rules of the Detroit Three be immediately brought on par with foreign carmakers such as Nissan, Toyota and Honda.

* Require that any compensation -- outside of customary service pay -- that occurs for workers who have been fired, laid off, furloughed, or idled, be immediately terminated.

(Reporting by Karey Wutkowski, editing by Matthew Lewis)