Detroit bailout may bring on U.S. oversight
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WASHINGTON: Congressional Democrats on Sunday were weighing options for tight government control of the crippled American auto industry, including the possible creation of an oversight board made up of five cabinet secretaries and the head of the Environmental Protection Agency, and led by an independent chairman or "car czar" to be named by President George W. Bush.
While the form of oversight was still being negotiated by congressional Democrats and the White House late Sunday, the talks made clear the extent to which the auto companies would have to submit to substantial government supervision in order to receive a taxpayer-financed bailout.
Under one proposal, the board would direct the drastic reorganization plans that the auto companies have said they were willing to undertake in exchange for billions of dollars in short-term government loans to keep them in business, according to a senior congressional aide.
The discussions of how strong a hand the government should take with the auto industry came as congressional and White House negotiators sought to put the final touches on emergency bridge loans of about $15 billion to keep General Motors, Chrysler and Ford afloat. The final legislation is also expected to impose stringent taxpayer protections, including stock warrants that would give the government an equity stake in the three firms, new limits on executive pay and a ban on stock dividends while the loans are outstanding.
Once a bill offering aid to the industry is finalized by congressional Democrats and the White House, it must still win the approval of Senate Republicans.
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President-elect Barack Obama, whose transition team has been involved in the auto talks, made starkly clear in an interview and at a brief news conference on Sunday that any aid to the Big Three auto companies should not come without significant concessions by the firms.
"They're going to have to restructure," Obama said in an interview on "Meet the Press" on NBC. "And all their stakeholders are going to have restructure. Labor, management, shareholders, creditors — everybody is going to recognize that they have — they do not have a sustainable business model right now, and if they expect taxpayers to help in that adjustment process, then they can't keep on putting off the kinds of changes that they, frankly, should have made 20 or 30 years ago."
Still, the bill seemed likely to stop short of authorizing the broad powers that some lawmakers had urged to allow what could have amounted to an out-of-court bankruptcy proceeding, in which the automakers creditors could be forced to accept reduced payments, labor contracts could be rewritten and executives summarily dismissed.
For his part, Senator Christopher Dodd, the chairman of the Senate banking committee that is drafting the legislation, called for the dismissal or resignation of Rick Wagoner, the chief executive of GM, which is the most imperiled of the automakers.
"I think you've got to consider new leadership," Dodd said in an interview on "Face the Nation" on CBS. "If you're going to really restructure this, you've got to bring in a new team to do this, in my view."
Asked specifically about Wagoner, Dodd, said: "I think he has to move on."
A GM spokesman, Steve Harris, said that the company was grateful for Dodd's assistance and that the company was willing to accept tough oversight in exchange for government aid, but that it retained confidence in Wagoner.
"We appreciate Senator Dodd's support in trying to provide some assistance for the industry, but General Motors' employees, dealers, suppliers and the GM board of directors feel strongly that Rick Wagoner is the right person to continue the transformation of the company that he began and has presented plans to Congress to continue and accelerate," Harris said.
All of the legislative proposals under consideration made clear that congressional Democrats and the White House, furious over the need for yet another huge corporate bailout, intend to make the auto manufacturers pay a price far greater price than the 5 percent interest on the emergency loans.
Congressional Democrats said that if any of the companies fail to meet government requirements by the end of March, the emergency loans could be called in for immediate repayment.
At the news conference in Chicago, Obama reiterated his position that it would be unacceptable for the government to allow the auto industry to collapse. But using somewhat tougher language than he has before, he said it "makes no sense for us to shovel more money into the problem" if the companies are unwilling to reorganize.
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