Lead Stories
Associated Press/Photo by J. Scott Applewhite

A vote for Detroit

Economy | The House of Representatives voted Wednesday to pass a $14 billion loan for the survival of the three Detroit automakers

WASHINGTON - Though the automakers' bailout appears to face insurmountable challenges in the Senate, the House of Representatives passed legislation in a 237-170 vote Wednesday night to provide the U.S. industry with $14 billion in loans, with the contingency that President Bush would appoint a "car czar" to oversee restructuring in the three companies-Ford, General Motors, and Chrysler.

The Senate plans to vote on the legislation later in the week.

President Bush has strongly supported the bill, but Senate Democrats are not certain they have the 60 votes needed to pass the legislation because of a Republican revolt. Sen. Richard Shelby, R-Ala., the ranking member on the Senate Banking Committee, has taken the lead in opposing the bailout, threatening a filibuster to prevent the passage of the bill. Some Republicans believe that General Motors or Chrysler or both should be allowed to enter bankruptcy and begin restructuring under its protection.

We see you’ve been enjoying the content on our exclusive member website. Ready to get unlimited access to all of WORLD’s member content?
Get your risk-free, 30-Day FREE Trial Membership right now.
(Don’t worry. It only takes a sec—and you don’t have to give us payment information right now.)

Get your risk-free, 30-Day FREE Trial Membership right now.

"People realize that this bill is an incredibly weak bill, (and) is the product of an administration that wants to kick the can down the road and let somebody else deal with it," said Sen. Bob Corker, R-Tenn.

The president's Chief of Staff Josh Bolton made rounds in the Senate today to try to corral more GOP support. Vice President-elect Joe Biden has said he would return to vote on the legislation if need be.

If the legislation should pass the Senate, the cash will flow to the car companies within days. The cash comes not from the already-approved economic bailout funds, as originally proposed, but from money already appropriated in an energy bill last year-a Bush administration demand. The money was intended to help the companies develop higher fuel efficiency vehicles.

The Detroit Three will be getting less money-they requested $34 billion last week-and more regulation. The so-called "car czar," a regulator of the funds to be appointed by the president, will dole out loans to the three companies and can revoke them from any that don't meet restructuring requirements by the spring. Also, executives cannot own or lease corporate aircraft under the legislation.

Republicans are concerned that the czar will be running auto companies instead of simply providing oversight of federal funds, a step towards nationalization of the auto industry, they say.

"Trusting a Washington bureaucrat, who probably never tightened a lugnut, with fixing what ails the American automotive industry is not the answer," said Rep. Mike Pence of Indiana in a statement. Pence will take over as the party's conference chair, the No. 3 Republican in the House, next month.

While some Republicans in both the House and Senate have advocated allowing failing companies to go into bankruptcy, Democrats say that bankruptcy for the automotive industry would be a sure death sentence and would cost the government more in welfare benefits and the like.

"If we do nothing, we face the risk that sometime soon there will be no auto industry," said House Majority Leader Steny Hoyer.

A Republican congressman from Michigan, Thaddeus McCotter, was born in Detroit and argued in favor of the bill on behalf of Michigan workers, quoting the Bob Seger song "Feel Like a Number," saying, "I'm not a number, I'm a man."

Auto industry struggles have been attributed to mismanagement, a poor business model, declining demand, the global recession, and the financial crisis. U.S. automakers have struggled in part because their sales of pick-ups and SUVs have dropped, vehicles that provide them the highest profit margins. Compact, fuel-efficient cars provide a smaller profit margin to automakers in general, but sales of those cars went up as oil prices climbed to record highs this year. Now that oil prices are down again, Americans are turning again to SUVs, according to AAA numbers, though their appetite for gas-guzzling cars has diminished. And the overall market for new cars has shrunk, too.

"The auto industry didn't have the capacity to turn on a dime, like public opinion turned on a dime," said Rep. John Conyers, D-Mich., who supported the legislation. He doesn't believe higher fuel-efficiency standards contributed to the auto industry's ills. So the three U.S. auto CEOs find themselves in what President-elect Obama called "the perfect storm," and now all eyes are on the Senate when it considers the legislation next.

The House stands adjourned until January.

The Associated Press contributed to this report.

Emily Belz
Emily Belz

Emily, who has covered everything from political infighting to pet salons for The Indianapolis Star, The Hill, and the New York Daily News, reports for WORLD from New York City. Follow Emily on Twitter @emzleb.

Comments

You must be a WORLD member to post comments.

    Keep Reading