Automakers’ rescue bill seems doomed in US Senate

11 December 2008 20:07  [Source: ICIS news]

WASHINGTON (ICIS news)--Despite the support of President George Bush, President-elect Barack Obama and approval by the US House of Representatives, the Big Three automobile bailout bill appears stalled in the Senate, leaders said on Thursday.

“We have to ask ourselves whether the proposal before us achieves the goal that everyone claims to embrace - namely, the long-term viability of ailing car companies - and in my view it does not,” said Senator Mitch McConnell of Kentucky, the Senate Republican leader.

McConnell and other Senate Republicans spoke against the emergency $14bn (€11bn) loan package, HR-7321, that was approved by the House with a 237-170 vote late on Wednesday.

That bill was supported by the White House, and Obama said on Thursday that he supports the legislation, adding that "I am hopeful that a final agreement can be reached this week".

But that does not appear very likely.

A similar bill introduced by majority Democrats in the Senate also would impose conditions on ailing Detroit-based automakers and would be overseen by a so-called car czar, who would monitor car companies’ plans to restructure their operations and product lines using federal loans.

However, McConnell and other Republicans - and some Democrats - in the Senate contend that the House-passed measure “isn’t nearly tough enough”.

“A primary weakness relates to the so-called car czar, who has nearly unlimited power to allocate taxpayer dollars [to the automakers] but limited ability to force the kinds off touch concessions that long-term viability would require,” McConnell said on the Senate floor.

The outcome of the auto rescue measure - and the ultimate fate of Detroit car manufacturers - is important to US chemical companies because the auto sector is a major downstream consuming industry for a wide variety of chemicals, plastics and coatings.

He also voiced opposition on grounds that in seeking to rescue Detroit-based automakers, Congress is “creating the impression in some minds that the federal government is picking favourites, and that favoured businesses get help while others don’t”.

McConnell said the $700bn financial system bailout bill passed by Congress earlier this year was aimed at rescuing the entire economy while the automakers rescue bill is intended to save a single industry.

“There are many principled reasons to oppose this bill. But the simplest one is also the best: a government big enough to give us everything we want is a government big enough to take everything we have,” he said. “And even in turbulent moments like this - perhaps especially at moments like this - it’s a principle well worth defending.”

McConnell and other Senate Republicans - John Cornyn of Texas, Richard Shelby of Alabama and Robert Bennett of Utah - also oppose the bailout loan package because it imposes major concessions on automaker management but requires that current high wages and retirement benefits for auto workers be maintained.

A Republican amendment to the bill would require “that labour costs at participating companies be brought on par with companies like Nissan, Toyota and Honda - not tomorrow but immediately - because it is delusional to think that a company which spends $71 per labour hour could compete with a company in the same industry that spends $49”, according to McConnell.

The Big Three traditional US carmakers in Detroit, Ford, Chrysler and General Motors, are said to have union labour costs of some $70/hour, while foreign carmakers - whose US plants are located in seven southern states where unions have less power - pay much lower wages.

McConnell said the bill also should require the automakers to go into bankruptcy if they fail to meet the tougher restructuring requirements that Republicans seek.

Senate sources said there is increasing doubt that the Detroit rescue plan can be approved. In addition to strong Republican opposition, there are some Democrat senators opposed to the bill, and at least two senators are out of the country on foreign travel.

Under Senate rules, a controversial measure such as the automakers rescue bill must garner 60 votes in the chamber where Democrats hold a slim 50-49 majority.

In addition, after Wednesday’s House vote, many representatives left Washington for their home districts or on previously scheduled foreign trips. So if the Senate does approve an emergency loan package that differs even slightly from the House-passed version, it would be difficult if not impossible for the House to reconvene, work out a compromise bill and vote on it before the Christmas holidays.

Backers of the rescue loan bill argue that even if it has flaws, Congress must act to shore up the automakers or risk seeing tens of thousands of car industry workers be laid off in a bankruptcy reorganisation. Those job losses would trigger others, they contend, putting as many as 3m US workers at risk of losing their jobs.

($1 = €0.77)

To discuss issues facing the chemical industry go to ICIS connect

By: Joe Kamalick
+1 713 525 2653

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly