Senators reach bipartisan deal on auto industry bailout
Dallas Business Journal
Media
A group of U.S. senators have reached a bipartisan agreement on a bill to support the auto industry. Details of the possible bailout for automakers is expected to be announced today, according to a representative of U.S. Sen. George Voinovich, R-Ohio.
However, U.S. Sen. Majority Leader Harry Reid, D-Nevada, said he did not believe the bipartisan agreement would pass the Congress, and instead called for automakers to submit a new bailout request, according to media reports.
Voinovich is one of four senators in Thursday’s agreement, with the others being U.S. Senators Carl Levin, D-Mich., Kit Bond, R-Mo., and Debbie Stabenow, D-Mich., according to Voinovich’s office. Original co-sponsors include Stabenow and Sens. Arlen Specter, R-Penn., and Sherrod Brown, D-Ohio.
The bill would repurpose money already appropriated by Congress for a $25 billion loan program for automakers. However, Voinovich’s office also said the bill would provide new taxpayer protections and strong congressional oversight, with the repaid funds eventually replenishing the account to be used for its original purposes.
“Right now, thousands if not millions of Americans who are tied to the automotive industry are worried about their jobs and providing for their families,” said Voinovich. “And they’re looking to Congress for leadership.”
Voinovich also said the legislation requires that the auto companies provide strategic plans detailing how they will ensure their financial viability and pay back the loans. The plan must be approved by the Secretary of Commerce.
“We must ensure that the American auto industry remains whole. During these uncertain and fragile economic times, in my opinion, bankruptcy is not an option,” Voinovich said. “Bankruptcy could trigger a deep recession and send us over the cliff. If these companies are allowed to fail, taxpayers will wonder why Congress failed to act and at least provide a mechanism for automakers to get a loan. Time is running out, and we must take action now.”
News of the deal immediately sent some automakers’ stocks soaring, with General Motors Corp. (NYSE: GM) stock jumping 12 percent, but then retreated at the close to $2.88 per share, up about 3 percent.
Business leaders from the U.S. auto industry went before Congress this week to plead for federal assistance, with companies such as GM reportedly at risk of filing for bankruptcy within a matter of months.
There has been resistance among members of Congress, particularly on the Republican side of the aisle, to approve an auto industry bailout that also seems unpopular with many people on Main Street. However, the United Auto Workers union officials have said a bailout is needed.
In a statement released Friday, Automotive News predicted dire consequences to the national economy if the automakers are allowed to fail.
According to the statement, the alternative to government cash for GM is not a Chapter 11 bankruptcy filing and reorganization that would ensure the corporation’s future success.
“Even if GM could get debtor-in-possession financing to keep the lights on (which it can’t),” the statement said, “Chapter 11 means a collapse of sales and a spiral into a Chapter 7 liquidation. GM’s 100,000 American jobs will die. Health care for a million Americans will be lost or at risk. Hundreds of GM’s 1,300 suppliers will die. Their collapse could take down Ford Motor Co. (NYSE: F) and Chrysler LLC, perhaps even North American transplants. Dealers in every county of America will close.”
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