Democrats urge Paulson to weigh aid for automakers
WASHINGTON (Reuters) - The top congressional Democrats urged Treasury Secretary Henry Paulson on Saturday to consider providing aid to troubled U.S. automakers as part of the Bush administration's corporate bailout efforts.
The letter from House of Representatives Speaker Nancy Pelosi and Senate Majority Leader Harry Reid recommended "strong conditions," possibly equity stakes and limits on executive compensation, in return for any help. The government is requiring similar steps in its rescue of banks.
"We must safeguard the interests of American taxpayers, protect the hundreds of thousands of automobile workers and retirees, stop the erosion of our manufacturing base, and bolster our economy," Reid and Pelosi said.
President George W. Bush's administration has never embraced a bailout for automakers and has urged industry to take advantage of other loan assistance approved by Congress this year.
General Motors Corp, Chrysler LLC and Ford Motor Co are seeking up to $25 billion in emergency loans to enable them to weather a crippling financial downturn they blame on plunging sales and the global credit crisis. Automakers would like another $25 billion later to help reduce their retiree health-care costs.
Car companies are burning through cash at an accelerated rate, with executives saying corporate and consumer borrowing for auto purchases is all but choked off by the housing and financial services meltdown.
GM warned on Friday its cash holdings would fall short of the minimum needed to run its business without new funding or other drastic action.
President-elect Barack Obama said on Friday that federal intervention to help the auto industry was a top priority of his transition.
Detroit welcomed the letter by Pelosi and Reid.
"We will continue to urge Congress and the Bush administration to immediately address the liquidity crisis facing the automotive industry," Chrysler said in a statement.
SEEKING URGENT HELP
Pelosi and Reid discussed the industry's fate with the chief executives of Chrysler, Ford and GM on Thursday. Although the companies are pressing for assistance, the legislative calendar is in flux and lawmakers cannot say yet whether they can help before the end of the year.
Some congressional Democrats insist the Bush administration has the power to offer substantial assistance now. Pelosi and Reid said a healthy automobile sector was crucial for restoring health to financial markets and the overall U.S. economy.
The administration instead is urging automakers to take advantage of aid already in the pipeline -- $25 billion in federal loans approved in September by Congress to help Detroit make more fuel-efficient vehicles.
Although the industry sought that package to spur new products like electric cars, automakers now say privately the financing would take too long to obtain and has too many strings attached to help them shake the current crisis.
Treasury spokeswoman Brookly McLaughlin could not say whether the agency had received the letter from Pelosi and Reid, but said the administration would "continue to work on a strategy that most effectively" leverages the bailout program to unfreeze credit markets.
The financing arms of GM, Chrysler and Ford have qualified for certain assistance under the bailout.
Sen. Carl Levin, a Michigan Democrat, said lawmakers were preparing legislation for consideration by a post-election "lame-duck" session of Congress that would increase the flexibility of the bailout program if Treasury objected on grounds it does not have the authority to act.
(Editing by Peter Cooney)
