10 December 2008 19:46 [Source: ICIS news]
WASHINGTON (ICIS news)--US House Democrats and the White House have agreed on terms of a $14bn (€11bn) rescue loan package for ailing Detroit automakers, but it faces opposition in the Senate, top officials said on Wednesday.
The draft legislation would provide up to $14bn in bridge loans - down from an earlier figure of $15bn - to the so-called Big Three automakers but would impose many restrictions and conditions on the car companies.
The measure would create a car czar or overseer, to be appointed by President George Bush, to ensure that car makers who get emergency loan funding take appropriate steps to restructure their businesses and return to a competitive standing in the global automotive market.
In exchange for the emergency loans, car makers would have to give the federal government up to 20% of their common stock.
But the measure puts greater emphasis on repaying the loans rather than government ownership of shares. Interest on the emergency loans is set at 5% for five years but jumps to 9% after five years.
The bill requires that automakers create restructuring plans by 31 March next year that must meet the approval of the car czar and also must include steps to produce more environmentally friendly and energy efficient cars.
It also demands that those car companies that take emergency loans must preserve auto industry jobs and maintain existing retirement and health benefits.
The restructuring plans must be agreed to by all stakeholders in a given company, the legislation says, including employees and retirees, creditors, suppliers, auto dealers and shareholders.
If the borrowing automaker does not live up to the terms of the restructuring plan, the car czar has authority to order repayment of the loan within 30 days.
Although the measure is said to be virtually assured of passage in the House of Representatives - in a vote that may come as early as today - the bill still faces stiff opposition among many in the US Senate.
Senate Minority Leader Mitch McConnell (Republican-Kentucky) complained on the Senate floor on Wednesday that Republicans in the Senate have yet to see the bill.
“As of this morning, we still haven’t seen the final version of this bill,” McConnell said. “Once we do, we’ll review it to see if it meets our standard for support - the taxpayers’ standard for support.”
McConnell also said that Senate Republicans will not be rushed to judgement on the bill. “Let me be clear: there will be no vote on this legislation today,” he said.
He said the final bill must not allow spending taxpayers’ money “on ailing carmakers unless these companies are forced to reform their bad habits - either inside or outside of bankruptcy”.
He said car companies will have to rationalise their cost structures, a reference to the
“A company that does not respond to market conditions is a company that is doomed to failure anyway,” McConnell said. “And Republicans will not allow taxpayers to subsidise failure.”
The auto industry bailout bill must get the support of at least 60 of the Senate’s 99 current members if it is to pass. The 100-seat Senate is shy one member because President-elect Barack Obama resigned his Senate seat last month.
Sixty votes are needed to end debate on a bill in the Senate, or opponents can simply continue indefinite debate on a measure - a practice known as a filibuster - until its backers withdraw it.
According to Hill sources, in addition to broad opposition to the measure among the Senate’s 49 Republicans, several of the chamber’s 50 Democrats also are unhappy with the bailout bill.
Senate Majority Leader Harry Reid (Democrat-Nevada) has warned that he will keep the Senate in session through the coming weekend if necessary to complete work on the automotive emergency loan package.
($1 = €0.77)
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