House Passes Auto Industry Bailout Package
By Kevin Miller
Last night, the US House of Representatives passed H.R. 7321, Auto Industry Financing and Restructuring Act, the anticipated legislation to provide a loan package to US automakers. Democrats in the house worked with members of the Bush administration to negotiate the auto industry aid. The bill passed by a margin of 237 to 170.
Prior to voting in the House, White House spokeswoman Dana Perino issued a comment in support of the legislation, stating “We believe the legislation developed in recent days is an effective and responsible approach to deal with troubled automakers and ensure the necessary restructuring occurs.”
The same tone was echoed in the House, with House Speaker Nancy Pelosi stating “This legislation is about offering Detroit and America a chance to get back on track,” in a speech made prior to voting. Under the terms of the plan, the government will grant direct bridge loans to automakers, using money that was previously earmarked for promoting more efficient vehicles by funding plant retooling. In return, the government gets an equity stake in the automaker totaling twenty percent of the amount borrowed.
This $14B rescue package, which is less than half of the amount requested by the automakers’ corporate executives during hearings earlier this month, is intended to carry the automakers through the end of March. By that time, the automakers must convincingly restructure their businesses in order to be eligible for more aid under an Obama administration.
Whether or not the automakers’ restructuring plans are compelling enough to continue will be decided by a presidentially-appointed trustee, referred to as the “car czar.” This administrator who will report to Congress, will be responsible for enforcing the conditions of the loan and for critiquing any restructuring plans (including renegotiation of labor contracts and employee compensation).
Upon passage of the legislation in the House, GM issued the following statement:
We thank the House and its leadership for their bipartisan vote to support America’s domestic automakers at this most critical time for the nation’s economy. The House vote brings us closer to saving jobs and to creating a more competitive U.S. auto industry in order to maintain America’s economic vitality. We encourage the Senate to act soon so that we can continue at full speed on the restructuring and advanced technologies plans that will form a stronger, more viable GM.
As mentioned in GM’s statement, the next hurdle for automakers lies in the Senate, which is expected to vote this week on the $14B loan package. Out of one hundred members, sixty affirmative Senate votes are needed to overcome procedural obstacles. While Democrats have a 50-49 advantage, and there are two independents who are said to support the Democrats, it is believed that not enough Republican senators will support the package to vote it in to law, as Senate Republicans are largely not in favor of the bailout. While Majority Leader Harry Reid said he would like a quick vote in the Senate, opponents of the bill could delay the vote until the weekend.
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