US House of Representatives approves auto bailout plan
11/12/2008 15:26
The US House of Representatives last night approved a US$14-billion auto
bailout plan to save the country's struggling auto industry from
bankruptcy.
The bill, which signifies the most extensive government
intervention in the US industry in years, still needs to go to the Senate today
for approval. However, some Republican Senators have voiced strong opposition,
leaving the bill's passing prospects quite uncertain.
The bailout plan
includes the extension of taxpayer-funded loans or lines of credit to the
so-called Detroit Three, namely General Motors (GM) Corp, Ford Motor Co and
Chrysler LLC, and the appointment of a government "car czar" who will oversee
the rescue package and a major auto industry restructuring aimed at innovation
and commercial viability.
Among the three auto giants, GM and Chrysler, which
are in urgent need of short-term government loans to evade the imminent danger
of bankruptcy, are expected to receive the money within days after the bill's
passage. Ford, which said it currently has sufficient cash but wants to get a
line of credit in case its finances worsen, will also become eligible for
federal aid.
The House approved the legislation 237-170, just hours after the
Congressional Democrats and the White House reached a deal on the draft package
following two days of painstaking negotiations.
According to an earlier
agreement reached last week between the Bush administration and the Congress,
the rescue fund will be drawn from an existing 25-billion-dollar loan program
meant to help the Detroit Three retool to make more fuel-efficient
vehicles.
Some analysts believe the bill will lay the groundwork for
additional loans to the auto industry, which requested a total of US$34 billion
in government help at Congressional hearings last week.
However, a deadline
of March 31 will be imposed on the carmakers to complete their restructuring
plan and convince the government of their survival capabilities in the long run.
If they failed to do so, the government "car czar" would have the power to
withdraw the federal money and virtually push the companies into
bankruptcy.
House Speaker Nancy Pelosi said the legislation represented "
tough love" for the American auto makers, and was "giving a chance -- this one
more chance -- to this great industry."
"We want to throw a lifeline for
success. We do not intend to afford life support," she said.
House Majority
Leader Steny Hoyer said it was critical that the government bailout could
proceed.
"If we do nothing, we face the real threat that sometime soon there
will be no American auto industry," he noted.
The White House also called on
the Republicans to endorse the bill. "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," White House
spokeswoman Dana Perino said in a statement.
Compared with the House vote
which only requires a simple majority, the Senate voting will be much tougher,
as 60 votes will be needed to ensure the passage and the Democrats are holding
the chamber only by 50-49. Analysts say the Democrats may need to get a dozen
Republican Senators on board to secure the approval.
"The ball is in the
Senate Republicans' court," said Jim Manley, a spokesman for Senate Majority
Leader Harry Reid. "There is no word yet whether they will give us
consent."
Some Republican Senators have vowed to block the deal. And Senator
Mitch McConnell, the Republican leader, said Republicans will not allow
taxpayers to subsidize failure.
Republican Senator Richard Shelby on CNBC
voiced his dislike for the auto bailout plan, calling it very "un-Republican."
He said he would prefer to see the Detroit Three file for bankruptcy.
Senator
George V. Voinovich, a Republican from Ohio and a leading supporter of the
emergency measure, warned that the deal doesn't have the necessary Republican
votes to pass Congress.
Yesterday, the US stock market opened higher on the
positive progress for the auto bailout plan, as overnight media reports said
that the White House and the Congressional Democrats already reached a
"conceptual agreement" to put the plan to Congress vote.
At the close of the
trading, the Dow Jones industrial average rose 70.09, or 0.81 percent, to
8,761.42, and the Standard & Poor' s 500 index rose 10.57, or 1.19 percent,
to 899.24.
According to estimates by the auto companies themselves, the
rescue plan could help save more than 350,000 industry jobs and employment for
millions of others.
Xinhua
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