Debate over auto industry bailout

November 17, 2008 2:59:26 PM PST
Just about everybody in Washington agrees the auto industry is in trouble. But Republicans and Democrats cannot agree on a rescue plan to help the Big Three carmakers. General Motors executives claim their company could run out of money early next year. And, if the car companies are forced out of business, that means hundreds of auto industry suppliers will also be forced to close down.

The CEOs of GM, Ford and Chrysler will all go to Capitol Hill Tuesday to ask for more financial help from the government.

The Big Three will get help, but there is significant debate over how much they should get, what strings should be attached and whether it's politically realistic to expect both parties to agree to anything during a lame duck session.

With each passing day, the Big Three continue to burn through cash. Both Republicans and Democrats agree that the economic stakes are too high for the government to allow the auto industry to fail.

"If there ever were a time for working together this is it. Senators have a choice to make. We can wait until January when we have a new Congress and new President, or we can start trying to work on some of these problems now," said Sen. Harry Reid, D-Nevada.

The Democrats want to provide Detroit with a $25 billion loan but they want that money to come from the $700 billion Wall Street bailout package. There would be a government ownership stake in the auto companies and federal oversight of their business decision-making.

"The federal government once again...has to have strict oversight so we can get our car industry in shape again," said Rep. Luis Gutierrez, D-Chicago.

The Democrats' plan is likely to pass the House this week, but the odds are much longer in the Senate where Republican votes are needed.

The Bush administration opposes dipping into the financial industry bailout money. It says instead that a $25 billion loan to Detroit -- already approved in September -- should be the money source. That loan was intended to assist the Big Three in their manufacture of more fuel-efficient cars.

"We only think taxpayer dollars should go to companies that can show viability and a willingness to make tough decisions to restructure themselves," said Dana Perino, White House press secretary.

Even if both parties are able to reach an agreement in their lame duck session, it comes too late for some dealerships that are going under and a growing number of auto industry suppliers who are laying off and closing plants, like Metaldyne in northwest suburban Niles.

Metaldyne announced last summer that its aluminum casting operation in Niles was up for sale. The company was unable to find a buyer and announced earlier this month that the plant would close next March 31.

There are roughly 160 employees at Metaldyne. That Michigan-based firm has other plants that will remain open, but a spokesman says the Niles plant no longer fits into their future business plan.


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