Time running out for carmakers

Washington: The debate over the automaker bailout in Congress has become a race against the clock.

The US House voted 237-170 Wednesday night to approve emergency loans for General Motors Corp and Chrysler LLC, shifting the focus to the Senate, where Republican opposition threatens to delay or kill the legislation.

Democratic leaders and the Bush administration are trying to beat a deadline to save the companies and the millions of jobs dependent on the industry before GM and Chrysler burn through their remaining cash.

For GM, that could be in three weeks.

"Without this bridge, we're going to fall into the biggest calamity this country has known since the Great Depression," said Representative John Dingell, a Democrat from Michigan, the carmakers' home state.

"A terrible disaster looms."

House Speaker Nancy Pelosi tossed a challenge to senators, saying on Bloom-berg Television that she wouldn't bring her chamber back for further action if the Senate passed a different version of the plan.

Keep operating

The legislation would let GM and Chrysler draw on $14 billion of loans to keep operating while they develop restructuring plans required by March 31. Without the aid, the two companies would likely have to declare bankruptcy by the end of the year.

"The House vote brings us closer to saving jobs and to creating a more competitive US auto industry," GM said in a statement that urged the Senate to act on the measure soon. The company's value has fallen 89 per cent since the last peak in October 2007.

The automakers could still be forced into bank-ruptcy under the legislation if the so-called car czar, an official to be appointed by President George W. Bush to oversee the loan program, decides their restructuring plans are insufficient.

Republicans said yesterday the House measure wouldn't give the czar enough authority to order cost cuts and other changes.

They argued that only a restructuring under bank-ruptcy protection can make the companies more competitive.

"The car czar doesn't have as much authority as he really needs," said Senator Robert Bennett, a Utah Republican.

"He needs the capacity of the master in bankruptcy to force things to happen."

The czar would have the power to veto automaker expenditures over $100 million.

Car companies that take loans would have to limit pay and ban bonuses for their 25 most highly paid executives. They also would be barred from owning or leasing passenger aircraft or paying dividends to shareholders.

Stock Warrants

Taxpayers would receive stock warrants equal to 20 per cent of the aid. The US may end up holding a large stake in the automakers based on that provision. GM, with a market value of about $2.8 billion, is seeking $10 billion to survive until March 31.

In a sign pressure is growing for GM to solve its cash shortfall, the automaker has been asked for payments in advance by a small number of auto-parts companies, people familiar with the matter said.

GM has rejected the requests, which so far come from a fraction of its 3,600 suppliers, said the people, who asked not to be identified because the discussions are private. GM typically pays vendors about 45 days after getting an invoice.

GM shares trading in Germany were up 1.3 percent at the equivalent of $4.66 as of 11:18am local time yesterday. Ford was little changed.

Senate Republicans emerged from a meeting yesterday with Vice-President Dick Cheney and White House Chief of Staff Josh Bolten and said the measure doesn't have enough support to clear a 60-vote legislative hurdle. Democrats control the chamber 50- 49.

"It has minimal, very little support in our caucus," Tennessee Republican Bob Corker said after the meeting.

He said Cheney and Bolten gave a "non-compelling" presentation in favour of the plan.

Deputy White House Chief of Staff Joel Kaplan today said, "We're going to try like heck to get the votes" from rebellious Senate Republicans. Kaplan said he would be on the phone lobbying this morning.

A bankruptcy of one or more automakers would mean the loss of more than a million jobs, he said, citing White House and outside economic analysts.

"We just don't think that makes sense when there is another option," Kaplan said in an interview yesterday on C-SPAN.

Senate Majority Leader Harry Reid, a Nevada Democrat, is trying to work with Republicans on an agreement that might allow Senate votes tomorrow related to the bailout, said his spokesman, Jim Manley.

Republicans who oppose the measure said Congress should stay in session next week to allow time for changes.

Any revisions in the legislation by the Senate would require the House to reconvene.

During the debate, Massachusetts Democrat Barney Frank warned colleagues that further House action is unlikely. "This is the last train out of the legislative station this year," he said.

Pelosi said on Bloomberg Television, "You never say never, but the fact is, I think it is important for the Senate to know that this is a strong bipartisan bill."