Senate to take up auto bailout, Bush offers plan

Other News Materials 15 November 2008 04:55 (UTC +04:00)

The U.S. Senate plans to take up a proposal to bailout distressed automakers, while the White House on Friday warned of partisan gridlock and recommended another route to get billions to Detroit fast, Reuters reported.

Senate Majority Leader Harry Reid said in a letter to his Republican counterpart that he "plans to press forward" with emergency legislation to General Motors Corp, Ford Motor Co, and Chrysler LLC on Monday even though Republican support was far from assured and perhaps in doubt.

Reid told Minority Leader Mitch McConnell that immediate action was necessary to protect millions of workers "at risk from the possible collapse" of one or more carmakers and related companies that supply the entire industry.

Automakers ramped up lobbying by flooding Congress with calls, emails and letters as lawmakers prepared for a weekend of negotiations on a bailout proposal.

As it stood on Friday, the bill would authorize $25 billion in loans from the Treasury Department's $700 billion corporate rescue program to help Detroit survive its financial crisis.

In return, the government would take equity stakes in the companies and impose limits on executive compensation. Other conditions could be added, lawmakers and aides said.

"At this point we're still discussing and negotiating with colleagues in terms of what the final amount would be. We know what we would like it to be," said Sen. Debbie Stabenow, a Michigan Democrat and an architect of the bailout.

Stabenow said there was virtual party line support from Democrats and supporters needed to pick up about 12 Senate Republicans. Sixty votes are needed to overcome procedural hurdles and clear the way for a vote on the bill.

Analysts have warned that any government assistance, which they say is imperative for GM to survive through early 2009, would come at a significant cost to existing shareholders.

GM shares closed up 2 percent to $3.01 while Ford traded 5 percent lower to $1.80. Chrysler is privately held by Cerberus Capital Management.

Industry blames its dire straits on plunging sales and the global credit crunch, while critics have said Detroit's problems have been worsened by the consumer shift to more fuel efficient vehicles made by overseas manufacturers.

Reid plans to introduce scaled-back legislation aimed at boosting the economy, including the auto aid and an extension of unemployment benefits. Debate is scheduled for Monday and Reid hopes to conduct procedural votes by Wednesday.

It will be difficult for Democrats to push through a bailout if minority Republicans erect procedural roadblocks.

Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said on Thursday he did not see enough support in the Senate to approve any bailout now and would be hesitant to bring it up if there was a chance of failure.

Sen. Richard Shelby of Alabama, the top Republican on the Banking Committee, said in an interview on MSNBC that a straight bailout would not help.