$15b deal near on automakers

Loans would hinge on naming of 'car czar'; Lawmakers await White House assent

After arriving in a caravan from Michigan, auto workers spoke to reporters about the need to help their industry. (Reuters Photo / Larry Downing)

WASHINGTON - The White House and Democratic congressional leaders sought last night to complete a deal to provide as much as $15 billion to struggling US automakers in return for appointment of a "car czar" to oversee the loans and the industry's retooling.

If the White House signs off on the emergency legislation, votes are expected this week in the House and Senate. The measure would give Chrysler, Ford, and GM access to the loans Dec. 15 by dipping into a previously approved fund to help the companies build fuel-efficient vehicles.

GM had said it would be forced to declare bankruptcy at the end of this month without the money, and Chrysler also said its position was precarious. Ford has said it might not tap the funds, but warned that the failure of any of the Big Three would devastate the industry.

The measure calls for a review board or a presidentially appointed overseer, who would determine whether the automakers have submitted adequate plans by the end of March to remake themselves into leaner companies that produce far more hybrid and electric cars. If they have not, the car czar could demand earlier repayment of the loans and prevent additional funding.

Although some Republican leaders have objected to bailing out US automakers, the measure has widespread support among Democrats and is expected to be backed by some GOP lawmakers in Midwestern states that rely on the industry.

US Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, is playing a key role in the negotiations. Frank said yesterday that he is "reasonably optimistic, but not certain" that the deal will be approved by Congress.

"There is always reason for concern, because the public is very unhappy with this situation," he said in an interview.

Last night, White House officials were reviewing the measure, which also restricts executive pay and corporate aircraft and requires that the automakers inform the government of any transaction of more than $25 million and withdraw from legal challenges against state antipollution laws.

"We've made a lot of progress in recent days to develop legislation to help automakers restructure and achieve long-term viability," White House spokeswoman Dana Perino said in a statement.

President Bush, in an interview aired last night on ABC's "Nightline," said, "These are important companies, but on the other hand, we just don't want to put good money after bad."

Frank said it was very likely that any problems could be worked out with the White House. However, with memories still fresh of how the $700 billion bailout of the financial industry nearly faltered after the House rank-and-file rejected the initial plan in the fall, lawmakers said nothing was certain until the votes are tallied.

House Speaker Nancy Pelosi said she was still working out details with the White House, but stressed that the deal would only work if all those involved in the auto industry's troubles - including management, union, bondholders, and shareholders - agree to share the pain.

"We call this a barbershop," Pelosi said. "Everybody's getting a haircut."

Added Senate majority leader Harry Reid: "While we take no satisfaction in loaning taxpayer money to these companies, we know it must be done. . . . This is no blank check or blind hope."

Ray Ciccolo, a member of the board of the Massachusetts State Automobile Dealers Association, flew to Washington yesterday to lobby lawmakers for the rescue package.

"We believe it's in the best interest of the country to give them this interim loan," said Ciccolo, president of Village Automotive Group in Boston, which includes GM brands such as Hummer, Saab, and Cadillac.

But Ernie Boch Jr., head of Boch Automotive of Norwood, said he still opposes a government bailout and believes that bankruptcy is the best way to restructure the automakers and make them viable.

"Their business model is flawed, and to give them money is wrong," said Boch, whose company does not include Chrysler, Ford, or GM dealerships.

The $15 billion is far less than the $34 billion sought last week by top executives of the Big Three automakers or the $125 billion that some analysts believe will ultimately be necessary. The legislation is designed as a short-term bridge to enable the automakers to stay afloat until the new Congress is seated Jan. 6 and Barack Obama is inaugurated as president two weeks later. Obama has expressed support for helping the auto industry, as long as executives commit to conditions such as building more hybrid and electric cars.

Asked on CNN whether the $15 billion is enough, United Auto Workers president Ron Gettelfinger responded: "We'll take this emergency bridge loan. This should get us through March. And by then, we should have restructuring plans in place."

Democrats had wanted Bush to tap the $700 billion allocated for the financial crisis, but the White House refused, saying that the money was reserved for easing the credit crunch.

Democrats also failed in their effort to get the Federal Reserve to loan money to the automakers.

On Friday, after the government reported the loss of more than 500,000 jobs last month, the most in a single month since 1974, Democratic leaders dropped their objection to tapping the $25 billion fund that automakers were supposed to use to retool their factories to produce more fuel-efficient vehicles.

Frank said that once Obama takes office the fund can be replenished and that more money would probably be made available if carmakers keep their commitments.

The measure proposed yesterday could garner support from key Senate Republicans who voiced support in November for a similar plan. One of them, Senator Arlen Specter of Pennsylvania, said he has agreed to meet with GM officials today. He said he would assess the consequences to the economy if the automakers fail against the likelihood that the proposal will work.

Senate minority leader Mitch McConnell said he wanted to make sure the legislation would include strict taxpayer protections and called for the automakers to commit to "significant and fundamental reform."

"We must first ensure that we do no harm to taxpayers later in our efforts to help any one particular industry now," he said in a statement. "Troubled automakers cannot expect taxpayer help without a serious commitment to change their ways, permanently."

Jenn Abelson of the Globe staff contributed to this report from Boston. Kranish and Paul reported from Washington.