WASHINGTON (Reuters) - Democratic congressional leaders seeking to salvage a bailout of the Big Three automakers demanded car executives provide a business survival plan on Thursday in exchange for their support for up to $25 billion in loans.
Democrats acknowledged growing public resentment over government bailouts of U.S. business in slowing the automakers’ drive for aid, instead saying they will take a look after the auto industry provides a roadmap to its survival.
House of Representatives Speaker Nancy Pelosi, a California Democrat, and Senate Majority Leader Harry Reid, a Nevada Democrat, told a crowded news conference on Capitol Hill that the automakers must develop a bailout proposal by December 2 and that it would be considered during the week of December 8.
“Until we can see a plan where the auto industry is held accountable and a plan for viability on how they go into the future... we cannot show them the money,” Pelosi said.
Said Reid: “We can only help if they (the automakers) are willing to help themselves.”
Providing a glimmer of hope, a group of U.S. senators said it reached a bipartisan agreement on a bill to bail out auto industry.
The White House said President George W. Bush could support the proposal spearheaded by Sen. Carl Levin, a Michigan Democrat, and Sen. Christopher Bond, a Missouri Republican, to allow automakers to use $25 billion in Energy Department loans for greener cars to address their current crisis.
Hanging in the balance is the future of General Motors, Ford Motor and Chrysler LLC, whose losses have mounted during a severe economic downturn that has prompted Americans to largely stop buying cars.
The Big Three’s auto executives testified on Capitol Hill this week about their dire economic situation, but undercut their argument by flying to Washington aboard corporate jets instead of taking cheaper transportation.
“I know it wasn’t planned, but these guys flying in their big corporate jets doesn’t send a good message to people in Searchlight, Nevada, or Las Vegas, or Reno, or any other place in this country,” Reid said.
The Big Three’s woes were adding to a chaotic U.S. economic picture, as stocks suffered losses on fears that failure to get a bailout would lead to thousands more layoffs and deepen what many economists believe are recession conditions.
In Detroit, United Auto Workers President Ron Gettelfinger said lawmakers need to take immediate action on a $25 billion loan bill to support the U.S. automakers or one or more could fail by the end of the year.
“Inaction is simply not an option,” he said.
A bankruptcy of one or all of the Big Three could shake vast sections of the U.S. economy, an argument Democrats have emphasized. Some Republicans have argued a bankruptcy could allow the companies to make structural changes needed to assure their long-term survival.
Many analysts believe the Big Three need massive restructuring in order to reduce the costs of a heavily unionized labor force and produce cars that Americans will buy, after years of producing gas-guzzling sport utility vehicles that have fallen out of favor after people got a taste of $4-a-gallon gasoline last summer.
The White House and its Republican allies on Capitol Hill have drawn the line against extending part of the $700 billion financial industry bailout to the Big Three because that could prompt other sagging industries to seek a government handout.
Instead, they have called on Democrats to back amending the $25 billion earmarked for meeting new fuel-efficiency standards to help the Big Three.
Clint Currie, a transportation analyst at the Stanford Group in Washington, said he believes Congress will pass a bailout with harsh terms for the industry in January.
Senior management might have to leave and there might be major mandates for restructuring attached, he said.
“I think there’s a fairly high likelihood that they’ll pass an auto bailout in January, and from all indications it’s not going to be something they’re going to like,” he said. “They’re going to have to take it or leave it at that point.”
Shares of GM and Ford rebounded from multi-decade lows after word of the bill negotiated by the senators.
Although the gains were tempered after Reid and Pelosi’s criticism, GM closed up 3.2 percent at $2.88 and Ford ended up 10.3 percent at $1.39, both on the New York Stock Exchange.
Additional reporting by Thomas Ferraro, Richard Cowan, Toby Zakaria and Andy Sullivan; writing by Steve Holland; Editing by Tim Dobbyn