Tri-City Herald Logo

Can Congress save the U.S. auto industry? | Tri-City Herald

×
  • E-edition
  • Home
    • Customer Service
    • Archives
    • Buy Photos and Pages
    • Contact Us
    • Mobile & Apps
    • Newsletters
    • Subscribe
    • Subscriber Services

    • News
    • Local News
    • Crime
    • Education
    • Hanford
    • Northwest
    • Nation & World
    • Obituary Listings
    • Politics
    • Elections
    • Health
    • Weird
    • Photos
    • Weather
    • Videos
    • Sports
    • Local Sports
    • Preps
    • Prep Countdown
    • Seattle Seahawks
    • Seattle Mariners
    • Tri-City Americans
    • Tri-City Dust Devils
    • Tri-Cities Fever
    • Hydros
    • Photos
    • Outdoors
    • Blogs
    • College
    • NFL
    • MLB
    • NBA
    • NHL
    • MLS
    • Golf
    • Politics
    • Business
    • Public Records
    • National Business
    • Technology
    • Entertainment
    • Local Arts
    • Celebrity
    • Mr. Movie
    • Movie Times
    • Movie News
    • Music News
    • Calendar
    • Submit Event
    • Puzzles & Games
    • Contests
    • Living
    • Food & Wine
    • Wine Press NW
    • Antique Appraisals
    • Health & Science
    • Home & Garden
    • Light Notes
    • Religion
    • Spiritual Life
    • Births
    • Engagements
    • Weddings
    • Anniversaries
    • Opinion
    • Letters
    • Editorials
    • National
    • Editorial Cartoons
    • Submit Letter
    • Guest Columnists
  • Obituaries

  • Classifieds
  • Jobs
  • Moonlighting
  • Cars
  • Homes
  • Place An Ad

  • About Us
  • Mobile & Apps

Latest News

Can Congress save the U.S. auto industry?

David Lightman - McClatchy Newspapers

    ORDER REPRINT →

November 12, 2008 02:49 PM

WASHINGTON — The lame-duck Congress is expected to reconvene next week with a bid to help the ailing Detroit carmakers, and lawmakers are weighing initiatives that could provide as much as $50 billion in new assistance.

With its stock battered and its market capitalization down to World War II levels, General Motors is warning that without government aid it could run out of cash this year.

The Bush administration has declined to lead any rescue of GM, Chrysler and Ford. However, the Democrats who control both chambers of Congress are readying plans that seek to lend a hand to the once-proud manufacturers. The three carmakers employ more than 200,000 people directly and sustain nearly 3 million more indirectly, according to a recent study by the Center for Automotive Research.

Lawmakers are expected to convene in a special session, probably Tuesday, to consider three possible approaches, which would:

SIGN UP

Sign Up and Save

Get six months of free digital access to the Tri-City Herald

SUBSCRIBE WITH GOOGLE

#ReadLocal

  • Modify an existing loan made in September. Congress approved a $25 billion loan then to help U.S. automakers build more fuel-efficient cars, but companies have had difficulty getting the money because of sticky federal rules. Lawmakers plan to urge the Bush administration to make the process quicker and easier.
  • Make it easier to tap the financial rescue package. The $700 billion rescue plan that passed Oct. 3 is intended to help financial institutions. That means the carmakers' financing arms could qualify but not the manufacturing end. Congress will look at ways to modify the rescue plan's terms, with an eye to providing $25 billion of it to the auto companies.
  • Help Detroit carmakers with health and pension obligations. Under the most controversial idea being floated, the firms would get $25 billion to help pay the rising costs associated with 780,000 retired autoworkers and their families. The United Auto Workers is pushing this idea. The generous health and pension provisions that the UAW won when Detroit was flush are now a big part of what makes them uncompetitive against foreign rivals who don't give their workers such expensive benefits.
  • No legislative decisions have been made, and the principal players are saying nothing publicly.

    Lawmakers are beginning to take sides, however. Skeptics, largely Republican members of Congress, are concerned about the price tag and the implications of rewarding a sector that's suffering from previous bad decisions. That reward is something economists call moral hazard: If government bails out private businesses that make bad decisions, it encourages others not to fear risk and thus to act recklessly.

    "I'm trying to focus on the moral hazard," said Rep. Tom Price, R-Ga., a member of the House Financial Services Committee. He and others also are concerned that helping the automakers will encourage every private business that's having financial trouble to ask Congress for aid.

    "Does it end with manufacturing? What about retail? What about Circuit City?" asked Rep. Spencer Bachus of Alabama, the committee's top Republican. The electronics chain filed for bankruptcy Monday.

    There are also concerns about the cost and increasing the already-record federal deficits.

    "I know the questions we're going to have, because of the questions we had with financial services," when constituents challenged the $700 billion bailout, Bachus said.

    Supporters of aid to the auto industry say that without help, however, major automakers could go bankrupt by the end of the year. The economic impact on the upper Midwest, from Ohio through Illinois and Michigan, could be comparable to a Hurricane Katrina.

    "At a time like this, pragmatism has to be the working philosophy of the day," said Rep. Paul Kanjorski, D-Pa., the chairman of the House subcommittee on capital markets, insurance and government-sponsored enterprises.

    He said the size of the loan shouldn't be a stumbling block, noting that the $700 billion financial-rescue plan "was based on a number pulled out of the sky to give clarity and show we were serious. Whether we go up or down that much doesn't make a difference."

    House Speaker Nancy Pelosi, D-Calif., says that any package would be "limited" and would include restrictions on executive pay and tough reviews of how the money was being used.

    The White House has been open to ideas, saying that it's willing to help cut the red tape involved in the $25 billion loan to promote more fuel-efficient cars but is reluctant to change the $700 billion rescue plan's terms.

    Treasury Secretary Henry Paulson said Wednesday that it was a mistake to use rescue funds for the auto sector.

    "I think it is very important for me to live within the intent of the bill, rather than trying to find loopholes or what have you," he said.

    However, he agreed that helping the sector through other means isn't a bad idea, and suggested that a broader approach is better than a stopgap measure.

    "I know the automakers are important. We care about the auto industry in the U.S. They are a key part of our manufacturing industry, and manufacturing is critical," he said. "I have said very clearly, I think the administration has said that we need a solution. But the solution has got to be one that leads to viability."

    (Kevin G. Hall in Washington contributed to this article.)

    MORE FROM MCCLATCHY

    To ask a question about this story or any economic question, go to McClatchy's economy Q&A

    Treasury scraps original bailout plan as economy worsens

    Economic summit unlikely to burnish Bush's legacy

    You know we're in trouble when even the casinos are losing

      Comments  

    Videos

    This Richland man wants Jim Mattis to run for President

    Watch snow pile up in time-lapse video

    View More Video

    Trending Stories

    ATM bandit steals $30,000 from credit union accounts in the Tri-Cities

    February 20, 2019 11:50 AM

    Richland school offering counseling after student’s death

    February 21, 2019 12:02 PM

    They tried to drive away after a Richland gunfight. Their SUV got stuck in the snow

    February 20, 2019 08:24 PM

    14-year-old girl plotted to steal a man’s weed, police say. He ended up stabbed 11 times

    February 21, 2019 08:11 PM

    Scott Servais announces pitchers for spring training opener vs. the Oakland Athletics on Thursday

    February 20, 2019 12:57 PM

    Read Next

    Richland and Chiawana boys have tough matchups at regional basketball tournament

    High School Basketball

    Richland and Chiawana boys have tough matchups at regional basketball tournament

    By Jeff Morrow Special to the Herald

      ORDER REPRINT →

    February 21, 2019 07:57 PM

    Richland takes on Mt. Si while Chiawana faces Puyallup. The Bombers have a berth in next week’s Class 4A state basketball tournament in Tacoma. The Riverhawks advance with a win. Both games are Friday night.

    KEEP READING

    Sign Up and Save

    #ReadLocal

    Get six months of free digital access to the Tri-City Herald

    SUBSCRIBE WITH GOOGLE

    MORE LATEST NEWS

    Rain or snow? Both could fall in the Tri-Cities area this weekend

    Local

    Rain or snow? Both could fall in the Tri-Cities area this weekend

    February 21, 2019 06:39 PM
    Prosser’s Bill Jenkin back at state capitol after heart attack

    Local

    Prosser’s Bill Jenkin back at state capitol after heart attack

    February 21, 2019 05:54 PM
    Richland man left shoeless in the snow after kidnapping and robbery

    Crime

    Richland man left shoeless in the snow after kidnapping and robbery

    February 21, 2019 10:14 AM
    Richland school offering counseling after student’s death

    Local

    Richland school offering counseling after student’s death

    February 21, 2019 12:02 PM
    Point your wheels at this meal to support Meals on Wheels

    Local

    Point your wheels at this meal to support Meals on Wheels

    February 21, 2019 05:33 PM
    I-84 in Oregon is open again after glass truck crash

    Local

    I-84 in Oregon is open again after glass truck crash

    February 21, 2019 08:12 AM
    Take Us With You

    Real-time updates and all local stories you want right in the palm of your hand.

    Icon for mobile apps

    Tri-City Herald App

    View Newsletters

    Subscriptions
    • Start a Subscription
    • Customer Service
    • eEdition
    • Vacation Hold
    • Pay Your Bill
    • Rewards
    Learn More
    • About Us
    • Contact Us
    • Newsletters
    • News in Education
    Advertising
    • Digital Solutions
    • Place a Classified
    • Local Deals
    • Contact Us
    Copyright
    Privacy Policy
    Terms of Service


    Back to Story