Auto industry rescue plan stalls

Democratic Congress, White House at odds over how to fund bailout

JULIE HIRSCHFELD DAVIS; The Associated Press
Last updated: November 20th, 2008 12:25 AM (PST)

Caught in the middle of a who-blinks-first standoff are legions of manufacturing companies and auto dealers – and millions of Americans’ jobs – after Senate Democrats canceled a showdown vote that had been expected today. President George W. Bush has “no appetite” to act on his own, the White House said.

U.S. auto companies employ nearly a quarter-million workers, and more than 730,000 others have jobs producing car materials and parts. About 1 million on top of that work in dealerships nationwide. If just one of the auto giants were to go belly up, some estimates put U.S. job losses next year as high as 2.5 million.

“If GM is telling us the truth, they go into bankruptcy and you see a cascade like you have never seen,” said Sen. George Voinovich, R-Ohio, who was working on one rescue plan Wednesday. “If people want to go home and not do anything, I think that they’re going to have that on their hands.”

The automakers – hobbled by lackluster sales and choked credit – are burning through money at an alarming rate: about $18 billion in the last quarter alone. General Motors Corp. has said it could collapse within weeks, and there are indications that Chrysler LLC might not be far behind. Ford Motor Co. has said it could get through the end of 2008, but it’s unclear how much longer.

For now, however, with the federal emergency loan plan stalled in the Senate, lawmakers in both parties are positioning themselves to blame each other for the failure.

Senate Majority Leader Harry Reid, D-Nev., scrapped plans Wednesday for a vote on a bill to carve $25 billion in new auto industry loans out of the $700 billion Wall Street rescue fund.

“I don’t believe we need the legislation,” Reid said. Treasury Secretary Henry Paulson can tap the financial industry bailout money to help auto companies, Reid said, but “he just doesn’t want to do it.”

Not our responsibility, countered the White House.

“If Congress leaves for a two-month vacation without having addressed this important issue … then the Congress will bear responsibility for anything that happens in the next couple of months during their long vacation,” said White House press secretary Dana Perino.

She said there was “no appetite” in the administration for using the financial industry bailout money to help auto companies.

The White House and congressional Republicans instead called on Democrats to back a GOP plan to divert a $25 billion loan program created by Congress in September – designed to help auto companies develop more fuel-efficient vehicles – to meet the immediate financial needs.

Voinovich and Sen. Kit Bond, R-Mo., along with Democratic Sen. Carl Levin of Michigan, worked on that plan Wednesday, trying to placate Democrats by including a guarantee that the fuel-efficiency fund would ultimately be replaced.

“It is the only proposal now being considered that has a chance of actually becoming law,” said Republican leader Mitch McConnell of Kentucky.

But there was little sign that Democratic leaders would go along.

“We have to face reality,” Reid said.

Originally published: November 20th, 2008 12:25 AM (PST)