WASHINGTON — Hardline opponents of an auto industry bailout branded the industry a “dinosaur” whose “day of reckoning” is near, while Democrats pledged Sunday to do their best to get Detroit a slice of the $700 billion Wall Street rescue in this week’s lame-duck session of Congress.
The companies are seeking $25 billion from the financial industry bailout for emergency loans, though supporters of the aid for General Motors Corp., Ford Motor Co. and Chrysler LLC have offered to reduce the size of the rescue to win backing in Congress.
Senate Democrats intended to introduce legislation today attaching an auto bailout to a House-passed bill extending unemployment benefits; a vote was expected as early as Wednesday.
A White House alternative would let the car companies take $25 billion in loans previously approved to develop fuel-efficient vehicles and use the money for more immediate needs.
Congressional Democrats oppose the White House plan as shortsighted.
Majority Democrats will need at least a dozen GOP votes in the Senate to prevent opponents from blocking their measure — assuming all Senate Democrats support it. Senate Republican Leader Mitch McConnell of Kentucky questioned whether there was sufficient Democratic support for an auto bailout in a statement released Sunday.
“The silence from the Democrat rank and file on this matter has been deafening,” McConnell said.
So far, two Republicans publicly have voiced support for the idea. Several others, including Minnesota Sen. Norm Coleman on Sunday, have indicated they might accept a rescue under strict conditions.
Sens. Richard Shelby of Alabama and Jon Kyl of Arizona said it would be a mistake to use any of the Wall Street rescue money to prop up the automakers because a bailout would only postpone the industry’s demise.
“Companies fail everyday and others take their place. I think this is a road we should not go down,” said Shelby, the senior Republican on the Senate Banking, Housing and Urban Affairs Committee.
“They’re not building the right products,” he said. “They’ve got good workers but I don’t believe they’ve got good management. They don’t innovate. They’re a dinosaur in a sense.”
Added Kyl, the Senate’s second-ranking Republican: “Just giving them $25 billion doesn’t change anything. It just puts off for six months or so the day of reckoning.”
House Speaker Nancy Pelosi, D-Calif., said over the weekend the House would aid the ailing industry, though she did not put a price on her plan. “The House is ready to do it,” said Democratic Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee. “There’s no downside to trying.”
Frank’s committee has scheduled a Wednesday hearing on an auto bailout.
It is a more difficult fight in the Senate, given the Democrats’ slim edge and President George W. Bush’s opposition. Bush wants to speed the release of $25 billion from a separate loan program intended to help the automakers develop fuel-efficient vehicles and have that money go toward more urgent purposes as the companies struggle to stay afloat. The loan program was approved by Congress last year, but more legislation would be necessary to change its purpose.
“That should be done this week,” Commerce Secretary Carlos Gutierrez said. He said reopening the Wall Street bailout and including automakers could attract other industries looking for bailouts.
“If you start that, where do you stop?” he asked. “There’s a line of companies of industries waiting at Treasury just to see if they can get their hands on those $700 billion.”
The disagreement raises the possibility that any help for automakers will have to wait until 2009, when President-elect Barack Obama takes office and the Democrats increase their majority in the Senate.
At least two Republican senators support an automaker bailout — George Voinovich of Ohio and Kit Bond of Missouri. But if the Republicans are seen as neglecting an industry that inevitably collapses, they risk lasting political problems in Midwestern industrial states that can swing for either political party.
Obama won most of the manufacturing states in the presidential race, including Ohio, a perennial battleground, and Indiana, which had not voted for a Democrat for president since 1964. Obama easily won Michigan after Republican John McCain publicly pulled out weeks before Election Day.
Former GOP House Speaker Newt Gingrich said young voters, who overwhelmingly supported Obama over Republican John McCain in the presidential election, could get turned off by expensive corporate bailouts that they will eventually have to pay for.
If “those 20-year-olds and 30-year-olds start to figure out they’re going to pay the taxes, they’re not getting the billions, I think you might find a lot of dissatisfaction by next summer,” Gingrich said.
Sen. Carl Levin, D-Mich., said automakers are working to adapt to a changing consumer market, but they need immediate help to survive the current economic crisis. “This is a national problem,” Levin said. “The auto industry touches millions and millions of lives.”
The companies are lobbying lawmakers furiously for an emergency infusion of cash. GM has warned it might not survive through year’s end without a government lifeline.
“It’s not the General Motors we grew up with. It’s a General Motors that is headed down this road to oblivion,” said Shelby. “Should we intervene to slow it down, knowing it’s going to happen? I say no, not for the American taxpayer.”
United Auto Workers President Ron Gettelfinger would not flat-out reject further concessions by members on top of the two-tiered wage system and other concessions the union gave the automakers last year, but he bristled at calls for further sacrifices by his members.
“Let’s go to AIG, Bear Stearns, active and retired workers: Did anybody go in and ask them to give back wages and benefit levels?” Gettelfinger said on WDIV-TV in Detroit. “What about the bond traders? Did anybody ask them? What about the cleaners in the building? Why would the UAW be any different?”
“We made an agreement, and we made major concessions,” he said. “So how can you blame the autoworkers?”
Obama said he believes aid is needed but that it should be provided as part of a long-term plan for a “sustainable U.S. auto industry” — not simply as a blank check.
“For the auto industry to completely collapse would be a disaster in this kind of environment,” Obama said in a “60 Minutes” interview airing Sunday night on CBS. “So my hope is that over the course of the next week, between the White House and Congress, the discussions are shaped around providing assistance but making sure that that assistance is conditioned on labor, management, suppliers, lenders, all of the stakeholders coming together with a plan — what does a sustainable U.S. auto industry look like?”
Lawmakers opposed to the bailout say Chapter 11 might be a better option than government loans and they cite the experience of airlines that have gone through the process of reorganization.
But GM CEO Rick Wagoner, also appearing on Detroit’s WDIV, said: “This idea that you just go into Chapter 11 and hang around for three months ... this is a fantasy. This is not going to work. Most important to what is going to happen is most people will stop buying the cars of a bankrupt company.”
Shelby and Levin were interviewed on NBC’s “Meet the Press” and Shelby also appeared with Frank on CBS’ “Face the Nation.” Kyl spoke on “Fox News Sunday” and Gutierrez was on “Late Edition” on CNN.