Published December 12, 2008

Race against time to rescue US car giants

House sends bailout Bill to Senate as GM and Chrysler face vanishing cash

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(WASHINGTON) The debate over the automaker bailout in Congress has become a race against the clock.

The US House of Representatives voted 237-170 on Wednesday night to approve emergency loans for General Motors Corp (GM) and Chrysler LLC, shifting the focus to the Senate, where Republican opposition threatens to delay or kill the legislation.

Democratic leaders and the Bush administration are trying to beat a deadline to save the companies and the millions of jobs dependent on the industry before GM and Chrysler burn through their remaining cash. For GM, that could be in three weeks.

'Without this bridge, we're going to fall into the biggest calamity this country has known since the Great Depression,' said Representative John Dingell, a Democrat from Michigan, the carmakers' home state. 'A terrible disaster looms.'

House Speaker Nancy Pelosi tossed a challenge to senators, saying on Bloomberg Television that she wouldn't bring her chamber back for further action if the Senate passed a different version of the plan.

The legislation would let GM and Chrysler draw on US$14 billion of loans to keep operating while they develop restructuring plans required by March 31 next year. Without the aid, the two companies would likely have to declare bankruptcy by the end of the year.

'The House vote brings us closer to saving jobs and to creating a more competitive US auto industry,' GM said in a statement that urged the Senate to act on the measure soon. The company's value has fallen 89 per cent since the last peak in October 2007.

The automakers could still be forced into bankruptcy under the legislation if the so-called 'car czar' - an official to be appointed by President George W Bush to oversee the loan programme - decides that their restructuring plans are insufficient.

Republicans said on Wednesday that the House measure wouldn't give the czar enough authority to order cost cuts and other changes. They argued that only a restructuring under bankruptcy protection can make the companies more competitive.

'The car czar doesn't have as much authority as he really needs,' said Senator Robert Bennett, a Utah Republican. 'He needs the capacity of the master in bankruptcy to force things to happen.'

The czar would have the power to veto automaker expenditures over US$100 million. Car companies that take loans would have to limit pay and ban bonuses for their 25 most highly paid executives. They also would be barred from owning or leasing passenger aircraft or paying dividends to shareholders.

Taxpayers would receive stock warrants equal to 20 per cent of the aid. The US may end up holding a large stake in the automakers based on that provision. GM, with a market value of about US$2.8 billion, is seeking US$10 billion to survive until March 31.

Senate Republicans emerged from a meeting on Wednesday with Vice-President Dick Cheney and White House chief of staff Josh Bolten and said the measure doesn't have enough support to clear a 60-vote legislative hurdle. Democrats control the chamber 50-49.

'It has minimal, very little support in our caucus,' Tennessee Republican Bob Corker said after the meeting. He said Mr Cheney and Mr Bolten gave a 'non-compelling' presentation in favour of the plan.

Senate Majority Leader Harry Reid, a Nevada Democrat, is trying to work with Republicans on an agreement that might allow a Senate vote scheduled for yesterday related to the bailout, said his spokesman Jim Manley.

Republicans who oppose the measure said Congress should stay in session next week to allow time for changes. Any revisions in the legislation by the Senate would require the House to reconvene.

During the debate, Massachusetts Democrat Barney Frank warned colleagues that further House action is unlikely. 'This is the last train out of the legislative station this year,' he said.

Ms Pelosi said on Bloomberg TV: 'You never say never, but the fact is, I think it's important for the Senate to know that this is a strong bipartisan Bill.'

In Sweden, the government yesterday announced a 28 billion kronor (S$5.16 billion) package to help the country's beleaguered automotive sector, including carmakers Volvo and Saab.

The measures 'will take the form of increased investment in research and development and state credit guarantees for raising loans (from) the European Investment Bank', the government said in a statement.

Volvo Cars is owned by struggling US automaker Ford while Saab Automobile is owned by General Motors.

The Swedish government, which had previously said it would await a US decision on a rescue package before announcing any measures, reiterated it would not take over the struggling Swedish carmakers. -- Bloomberg, AFP