BUSH THROWS DETROIT A LIFELINE…. Senate Republicans can block congressional action, but they can’t, oddly enough, prevent their friend at the other end of Pennsylvania Avenue from bailing out U.S. auto manufacturers.
President Bush on Friday announced $13.4 billion in emergency loans to prevent the collapse of General Motors and Chrysler, and another $4 billion available for the hobbled automakers in February with the entire bailout conditioned on the companies undertaking sweeping reorganization plans to show that they can return to profitability.
Mr. Bush made his announcement a week after Senate Republicans blocked legislation to aid the automakers that had been negotiated by the White House and Congressional Democrats, and the loan package announced by the president includes roughly the identical requirements in that bill, which had been approved by the House.
With surprising cogency, the president explained that it’s tempting to let the companies fail — the result of mismanagement and poor decision making — but the economic consequences would be too severe, and too sweeping, right now.
“Under ordinary circumstances, I would say [bankruptcy] is the price failed companies must pay,” Bush said. But in light of the deep recession, “These are not ordinary circumstances…. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action…. If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers.”
The rescue package comes in the form of government loans, but the money comes with all kinds of strings attached, including a March 31 deadline for company restructuring. Among the conditions are requirements that the companies cut their debt obligations by two-thirds and, in a move that will make the GOP happy, renegotiate the contract with the United Auto Workers to make compensation packages more competitive with foreign manufacturers with plants in the U.S.
So, are Corker, Shelby, and DeMint getting what they wanted, by forcing American workers to get paid less? That depends on how this shakes out — the NYT explained that Bush’s plan makes the requirements “non-binding, allowing the automakers to reach different arrangements with the union, provided that they explain how those alternative plans will keep them on a path toward financial viability.”
Also among the conditions are limits on executive pay and the elimination of the companies’ corporate jets.
The Politico’s report has more, including a fact sheet from the White House with additional details.