The plan would allow GM and Chrysler to avert all but certain bankruptcy through March, 2009. The Detroit Three will obtain the low-interest loans but the money won’t come without strings attached. The US government will become the companies' biggest shareholder. The czar could withhold additional loans or recommend Chapter 11 bankruptcy restructuring if progress falters.
President Bush will personally lobby Republicans to back the deal, but Sen. David Vitter, R-La., promised to filibuster any bill, which could delay a final vote for days. Sen. Mitch McConnell, the GOP leader, said, "Republicans will not allow taxpayers to subsidize failure."
If passed $14B could be disbursed within days to GM and Chrysler. Ford has said it can stay afloat through mid 2009 without loans but wants an emergency line of credit for use later if its balance sheet deteriorates, or if one of the other two fails, driving supplier costs up and supply chains out of business.
The White House announced "very good progress" on the wording of the bill, including the creation of a "car czar" position to be named by President Bush with consultation with the Obama transition team, The czar would be empowered to force the automakers into bankruptcy if they didn't cut quick deals with labor unions, creditors and others to restructure their businesses.
The czar could recall the government loans "at the end of the bridge period if he can't certify that they're executing a plan for viability," a senior Bush Administration official said. The czar could grant automakers a one-time, one month extension if they were making significant progress by April 30. Under the original Democratic proposal, if the czar didn't think the automaker restructuring plans were adequate, he or she would be required to submit a plan to Congress, which could then require a government-mandated restructuring and could have opted to call the money back. The czar would have veto power over any transaction of $100 million or more. The companies---including Cerberus, which owns a majority stake in Chrysler, would have to open their books to the government overseer.
The Detroit Three would have to negotiate with labor unions and creditors and submit blueprints by March 31, 2009, to the czar, but they would not have to drop lawsuits against California and other states that have passed auto emissions standards in excess of those mandated at the federal level.
The proposal also includes a bailout of some of the nation's largest bus and rail systems, because investment deals which have since been declared unlawful tax shelters which went bad in the collapse of American International Group Inc. and other financial institutions.
In other news, GMAC Financial Services, the financing arm of General Motors, said it hasn't raised enough capital to become a bank holding company and be eligible for aid under the government's $700 billion bank rescue plan. The company, in which GM holds a 49 percent stake, needs a minimum total regulatory capital of $30 billion to become a bank holding company.