New hope for Big Three bailout
Congressional Democrats and the Bush administration agreed on a bill that would grant $15 billion in loans to U.S. automakers, but it faces Republican opposition in the Senate.
Struggling U.S. automakers came a step closer to getting the lifeline they’ve asked for, after congressional Democrats and the Bush administration agreed this week on a bill that would grant $15 billion in loans in return for strict government oversight. The plan—which faced substantial Republican opposition in the Senate—would provide immediate cash to Chrysler and General Motors, which are facing imminent bankruptcy, and extend a line of credit to Ford in case its financial situation worsens.
In return for the money, taxpayers would get an ownership stake in the companies, which would be required to restructure themselves for long-term viability under the oversight of a “car czar” to be appointed by President Bush. The companies would be given until March 31 to cut costs, restructure debt, and obtain concessions from labor, or be forced by the czar to reorganize under Chapter 11 bankruptcy. Several Senate Republicans objected to both the bailout and the idea of a government czar controlling a private industry, but Democratic Rep. C.A. Dutch Ruppersberger of Maryland said the other options were worse. “For our auto industry to go into bankruptcy, I don’t know if the markets could stand it,” he said.
The Democrats’ agenda is transparent, said The Wall Street Journal in an editorial. They want to protect their “friends at the United Auto Workers” while forcing Detroit to stop making those “big cars that run on gasoline” that so many millions of foolish Americans are fond of driving. The only mystery is why President Bush, supposedly an opponent of nationalized industry, is even thinking of going along with it.
This bill won’t save the car companies, said David Leonhardt in The New York Times. It’s designed to postpone their day of reckoning so that they don’t collapse during a deep recession. But in the not-distant future, American automakers will have to merge and shrink “to a size that reflects the American public’s collective judgment about the quality of their products.”