Automaker Bailout Vote Could Start Today
By Michelle Krebs December 10, 2008By Michelle Krebs
The House of Representatives could vote as early as today on the $15-billion loan package for U.S. automakers after the Congressional Democrats and the White House reached an agreement in principle on Tuesday night.
If the legislation now being crafted is passed, the low-interest loans could make their way to General Motors and Chrysler by next week. The automakers have said they could run out of money before the year ends. The $15 billion in loans is intended to keep them afloat through March. Ford has said it doesn't need loans now but would like access to a line of credit if the economy worsens more than the automaker expects.
A bill is likely to get through the House, possibly today, but passing it in the Senate will be more challenging. Some Republicans, including the two Senators from Alabama, home to plants operated by Mercedes-Benz, Hyundai and Honda, one from Tennessee, home to major Nissan operations, and one from Kentucky, home to Toyota's vast facilities, are balking, even threatening to filibuster.
Key provisions of the rescue package, in addition to providing the loans, include: reporting by automakers to a trustee appointed by the president; ongoing restructuring that includes concessions by all constitutents from union workers to debt holders; and providing warrants to U.S. government, making it the largest shareholder in the car companies.
The automakers would be required to file restructuring plans with all of those elements by March 31. The so-called "car czar" then would review their progress and deem it adequate or not for further funds. The car czar would have the power to not only withhold further government funding but also could recommend the companies file for bankruptcy.
The proposal calls for the to receive warrants for equity equal to at least 20 percent of the loan it provides to each automaker. The companies would be barred from paying dividends to shareholders or bonuses to top executives during the loan period. Their plans would further include detailed plans for profitably producing fuel-efficient vehicles.
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