Stunned by the loss of 500,000 jobs, congressional Democrats and the White House reached for agreement Friday on about $15 billion in bailout loans for the beleaguered auto industry. President George W. Bush warned that at least one of the Big Three carmakers might not survive the current economic crisis.
Several officials in both parties said a key breakthrough on the long-stalled bailout came when House Speaker Nancy Pelosi bowed to Bush's demand that the aid come from a fund set aside for the production of environmentally friendlier cars. The California Democrat spoke to White House chief of staff Josh Bolten during the day to signal her change in position, they added.
The developments unfolded as desperate auto executives pleaded for a second day with lawmakers for loans to help them survive, and the government reported the worst single month's job loss in 34 years.
Pelosi's office issued a statement saying legislation would come to a vote in the House next week. The Senate is also scheduled to be in session to consider steps to aid Detroit's Big Three.
"Congress will insist that any legislation include rigorous and ongoing oversight to guarantee that taxpayers are protected and that resources are directed to ensure the long-term viability and competitiveness of the American automobile industry," Pelosi's statement said.
In a subsequent statement, she added that the billions originally ticketed for development of more environmentally friendly cars would be repaid "within a matter of weeks." Democrats said her hope was to include the funds in an economic recovery bill that lawmakers are expected to prepare for President-elect Barack Obama's signature shortly after he takes office.
Officials in both parties also said the legislation would include creation of a trustee or group of industry overseers to make sure the bailout funds were used by General Motors Corp., Ford Motor Co. and Chrysler LLC for their intended purpose. The funds are designed to last until March, giving the incoming Obama administration and the new Congress time to consider the issue anew.
One senior Democratic aide also said Pelosi was seeking a provision that would bar the automakers from using any of the funds to pursue a legal challenge to states seeking to implement tougher auto emission standards. The aide spoke on condition of anonymity because the legislation was not yet drafted.
At the White House, Bush declared the economy was in a recession, and he urged a gridlocked Congress to act quickly on a multibillion-dollar industry bailout — with taxpayer protections.
"We are going to have to have some give here," replied Massachusetts Rep. Barney Frank, a senior House Democrat, expressing optimism that compromise might be possible. It wasn't clear whether he was prodding Bush or Pelosi with his comments, but Republicans said there had been no lessening in Bush's refusal to tap the $700 billion financial industry bailout fund to help the automakers.
There were also fresh calls during the day for the Federal Reserve to come to the rescue of the Big Three, possibly in the form of low-cost loans. And Frank said he had talked with Tim Geithner, President-elect Barack Obama's choice for treasury secretary, a possible sign of involvement by the incoming administration.
"I am concerned about the viability of the automobile companies," a somber Bush said as a fresh report showed that employers slashed 533,000 jobs in November.
The president added, "I'm concerned about those who work for the automobile companies and their families. And likewise, I am concerned about taxpayer money being provided to those companies that may not survive." Bush did not elaborate, but executives at both GM and Chrysler have warned that their storied corporations could collapse by year's end.
In addition to the November layoffs, GM announced it will cut shifts at factories in Lordstown, Ohio, Orion Township, Mich., and Oshawa, Ontario, in February as a result of slumping auto sales. About 2,000 jobs were involved, bringing the year's total to 11,000.
The chief executives of GM, Ford and Chrysler, testified for a second day before Congress in support of their plea for a $34 billion bailout in the form of loans. "We believe this is the least costly alternative," Chrysler LLC chief executive Bob Nardelli said.
For the day, at least, their appeals were overtaken by the severity of the job loss figures, the worst in 34 years.
Frank said repeatedly that the unemployment statistics had quieted talk of allowing one or more of the automakers to go bankrupt.
"I think it's fair to say that the jobs report today, this disastrous jobs report, has heightened the interest in doing something." With trademark wit, he added, "If we are lucky we will come out with a bill here that nobody likes, because any bill that any individual liked couldn't pass."
Bush renewed his call for Congress to rewrite an existing $25 billion program intended to help the industry make more fuel-efficient vehicles. But the president did not explicitly foreclose other options, and Republican aides said the White House might be open to some sort of compromise.
Congressional budget analysts have said tapping the fuel-efficiency program for a broader auto bailout would net only $7.5 billion in short-term cash but amended that to say adjustments were possible that could double that amount. Pelosi and environmentalists had opposed making use of those funds. Instead, they wanted the administration to take money from a $700 billion financial industry bailout that cleared Congress last fall.
Democrats Set to Offer Loans for Carmakers December 5, 2008
WASHINGTON — Faced with staggering new unemployment figures, Democratic Congressional leaders said on Friday that they were ready to provide a short-term rescue plan for American automakers, and that they expected to hold a vote on the legislation in a special session next week.
Seeking to end a weeks-long stalemate between the Bush administration and House Speaker Nancy Pelosi, senior Congressional aides said that the money would most likely come from $25 billion in federally subsidized loans intended for developing fuel-efficient cars.
By breaking that impasse, the lawmakers could also clear the way for the Treasury secretary, Henry M. Paulson Jr., to request the remaining $350 billion of the financial industry bailout fund knowing he will not get bogged down in a fight over aiding Detroit.
Democrats are hoping Mr. Paulson will use some of that money to help individual homeowners avoid foreclosure.
The short-term plan is intended to help the automakers survive until the new administration takes over in January and can craft a longer-term solution to the industry’s troubles.
President-elect Barack Obama and his transition team have been working with Congressional leaders on both counts. Ms. Pelosi spokes to Mr. Obama on Thursday, and to Rahm Emanuel, Mr. Obama’s chief of staff, twice on Friday.
Ms. Pelosi also spoke by phone on Friday with Joshua B. Bolten, President Bush’s chief of staff, and the White House, too, seemed prepared to reach a deal.
“We’re continuing to talk to both parties and both houses of Congress, and we hope to make more progress this weekend,” said Tony Fratto, the White House deputy press secretary.
Details of the auto companies’ rescue package were not immediately available, but senior Congressional aides said that it would include billions of dollars in short-term loans to keep the automakers afloat at least until Mr. Obama takes office.
The auto companies will have to submit to strict government oversight to make sure that the bailout funds are used to carry out the reorganization plans they delivered to Congress this week. The auto company chiefs testified this week that they were willing to accept such regulation.
Ms. Pelosi had resisted using money from the fuel-efficiency program, which was approved as part of an energy bill last year, and Democrats had repeatedly called on the Bush administration or the Federal Reserve to act unilaterally, using existing authority, to aid the auto companies.
On Friday, Ms. Pelosi said she would allow that money to be used provided “there is a guarantee that those funds will be replenished in a matter of weeks” and there was no delay in working toward greater fuel efficiency.
Word of a breakthrough came as Congress wrapped up two days of hearings at which lawmakers grilled the chief executives of the companies — Chrysler, the Ford Motor Company and General Motors — and experts warned that G.M. could collapse by the end of this month.
The automakers seemed tentatively heartened by the progress at the Capitol. “We’re encouraged by Speaker Pelosi’s intent to move forward quickly to resolve a crisis that can only grow more serious without action,” said Greg Martin, a spokesman.
The proposed deal could still fall apart for several reasons.
It was unclear Friday how much support would come from Republicans, particularly in the Senate where procedural hurdles are high. Crucial details remain to be worked out, including how to restore the money to the fuel-efficiency program.
Under federal budget rules, those loan guarantees are now likely worth less than $25 billion because of the deteriorating condition of the auto companies. Congress appropriated $7 billion this fall to secure those loans. But now that the automakers’ finances have worsened, the default risk has increased substantially.
Congressional aides said that staff would work through the weekend to determine how much money would be available to aid the auto companies under the current conditions.
Under the financial system rescue law approved by Congress in October, the Treasury secretary must request the second $350 billion, and Congress then has 15 days to disapprove the disbursement. Congressional leaders, upset over Mr. Paulson’s management of the bailout program, have warned him that if he wants the money, he must ask for it by the end of next week.
Until the breakthrough Friday evening, it had appeared unlikely that Mr. Paulson would be able to persuade Congress to release the funds. Of the first $350 billion portion of the rescue fund, only $15 billion remains uncommitted.
It was the Labor Department’s report of 533,000 jobs lost in November that seemed to halt the hand-wringing on Capitol Hill over what to do about the auto companies, and prompted Democratic leaders to announce that they would draw up legislation for votes next week.
“Today’s announcement of major job losses and findings from Congressional hearings from the last two days make it clear that Congress must work on a bipartisan basis to provide short-term and limited assistance to the automobile industry while it undertakes major restructuring,” Ms. Pelosi said in a statement.
She added: “Congress will insist that any legislation include rigorous and ongoing oversight to guarantee that taxpayers are protected and that resources are directed to ensure the long-term viability and competitiveness of the American automobile industry.”
The Senate banking committee, led by Christopher J. Dodd, Democrat of Connecticut, began drafting legislation on Friday and staff were expected to work through the weekend. Mr. Dodd and other Democrats have proposed a strong oversight board or trustee to monitor any aid to the automakers.
“We aim to have votes next week on a responsible plan to help the millions of Americans who rely on a healthy auto industry for their livelihoods,” the Senate majority leader, Harry Reid of Nevada, said in a statement on Friday evening.
“We will need support and cooperation from Republicans to determine when that vote happens and whether it will succeed,” Mr. Reid said.
The Republican leader, Senator Mitch McConnell of Kentucky, had said that a deal to aid the auto industry was possible using the money authorized in last year’s energy bill.
But some conservative House Republicans have called for allowing one or more of the auto companies to enter bankruptcy.
“It’s fair to say the jobs report, the disastrous jobs report, has heightened the interest to do something,” said Representative Barney Frank, Democrat of Massachusetts, after leading a hearing on Friday on the auto companies’ request for aid.
A compromise on how to help the troubled automakers had proved elusive since G.M., Ford and Chrysler came to Washington last month to plea for aid.
The hearings in mid-November were disastrous for the Big Three, as their chiefs were criticized for flying in on private jets and failing to bring plans to make their struggling companies viable for the long term.
The tone was noticeably different at this week’s hearings.
G.M. is seeking $18 billion in loans, but says it needs $4 billion immediately to survive past the year. Chrysler, which is also running out of cash, wants $7 billion. Ford, the healthiest of the three, is asking for a $9 billion line of credit.
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