WASHINGTON (Reuters) - Lawmakers opened debate on Wednesday on legislation to bail out U.S. auto companies while Senate Republicans tore into the plan to force Detroit to restructure or fail, raising uncertainty about its prospects.
Following debate, a vote on passage in the House of Representatives was expected later in the evening.
Hopes evaporated for quick action by the Senate where Republicans, some of whose votes would be necessary to ensure passage, threatened procedural moves to slow or even block the effort to authorize up to $14 billion in bridge loans.
“Unless Chrysler, Ford and General Motors become lean and innovative and competitive in the market place, this is only delaying their funeral,” said Sen. Richard Shelby, an Alabama Republican and bailout opponent.
George Voinovich, an Ohio Republican and co-chairman of the Senate auto caucus that supports help for General Motors Corp, Ford Motor Co and Chrysler LLC, said he did not think the votes for Senate passage were there yet “on our side of the aisle.”
Voinovich said, “There is still some effort that’s going to have to be made.”
Both the House and Senate would have to pass an identical measure before it could be sent to President George W. Bush to sign into a law.
Many in Congress are anxious to prevent the threatened collapse of one or more of the Detroit Three — which directly employ 250,000 people and another 100,000 in related businesses. Industry says it accounts for 1-in-10 U.S. jobs.
Shares of GM and Ford, which declined as Republicans voiced opposition, drifted lower in extended trade. Ford stock lost 2.8 percent to $3.16 from a $3.25 close and GM slipped 1.5 percent to $4.53 from $4.60.
Credit markets also want bailout passage, as a bankruptcy or failure of the Detroit Three would threaten billions of dollars of financial instruments, say credit market analysts.
GM and Chrysler both want billions by month’s end to survive. Ford is seeking a line of credit to be tapped if its finances worsen more than expected in 2009.
Democrats are proposing direct bridge loans or lines of credit using funds previously appropriated for helping automakers retool factories and make more fuel efficient cars. In return, carmakers would give the government an equity stake equal to 20 percent of whatever is borrowed.
Any loans are intended to carry the companies through March 31, after which more help would depend on the quality of restructuring plans submitted to the government.
A presidentially appointed trustee, or “car czar” would enforce a myriad of conditions and judge restructuring, including the fairness and depth of concessions from labor, management, bondholders, vendors and lenders.
The “car czar” would report to Congress and could recommend bankruptcy as a restructuring option if the official deems restructuring plans inadequate.
Other conditions would prohibit bonuses for officers or “golden parachutes” and would make the companies sell or terminate leases on their corporate jets.
Congress resisted calls to give the “car czar” authority to dictate day-to-day operations nor did lawmakers require automakers to overhaul management, as some lawmakers want.
The planned conditions and “car czar” powers are not strong enough for some lawmakers, some of whom want ironclad guarantees on wage and other concessions and a clearer outlook on how the stricken companies plan to be competitive.
Senate Republican leader Mitch McConnell said Republicans want a bill that forces automakers, long struggling to compete with more fuel-efficient foreign-made vehicles, “to reform their bad habits.”
Sen. Bob Corker of Tennessee, a member of the Banking Committee, said fellow Republicans would try to craft an alternative that “has teeth and really moves things along very,
“Everything is in flux,” said a Republican Party leadership aide critical of the bill negotiated between Democrats and the Bush administration. “The White House is pretty much irrelevant over here.”
President-elect Barack Obama is set to replace Bush on January 20 and launch a sweeping plan of his own to revitalize the U.S. economy, which could plunge deeper into recession if the auto industry collapses.
The auto bailout has divided Congress. Many lawmakers say market forces, not a government saddled with a record deficit, should determine the automakers’ fate.
There also is reluctance to provide another federal rescue in the wake of the voter backlash against Congress for its passage of a $700 billion bailout for Wall Street in October.
Additional reporting by Matt Spetalnick, Rachelle Younglai, Donna Smith and Richard Cowan in Washington; Editing by David Alexander and Cynthia Osterman