GM, Chrysler short of time as Senate debates rescue

The debate over the automaker bailout in Congress has become a race against the clock.

The US House voted 237-170 last night to approve emergency loans for General Motors Corp and Chrysler LLC, shifting the focus to the Senate, where Republican opposition threatens to delay or kill the legislation.

Democratic leaders and the Bush administration are trying to beat a deadline to save the companies and the millions of jobs dependent on the industry before GM and Chrysler burn through their remaining cash. For GM, that could be in three weeks.

“Without this bridge, we’re going to fall into the biggest calamity this country has known since the Great Depression,” said Representative John Dingell, a Democrat from Michigan, the carmakers’ home state. “A terrible disaster looms.”

House Speaker Nancy Pelosi tossed a challenge to senators, saying on Bloomberg Television she wouldn’t bring her chamber back for further action if the Senate passed a different version of the plan.

The legislation would let GM and Chrysler draw on $14 billion of loans to keep operating while they develop restructuring plans required by March 31. Without the aid, the two companies would likely have to declare bankruptcy by the end of the year.

“The House vote brings us closer to saving jobs and to creating a more competitive US auto industry,” GM said in a statement that urged the Senate to act on the measure soon. The company’s value has fallen 89 per cent since the last peak in October 2007.

The automakers could still be forced into bankruptcy under the legislation if the so-called car czar, an official to be appointed by President George W Bush to oversee the loan program, decides their restructuring plans are insufficient.

Republicans said yesterday the House measure wouldn’t give the czar enough authority to order cost cuts and other changes. They argued that only a restructuring under bankruptcy protection can make the companies more competitive.

“The car czar doesn’t have as much authority as he really needs,” said Senator Robert Bennett, a Utah Republican. “He needs the capacity of the master in bankruptcy to force things to happen.”

The czar would have the power to veto automaker expenditures over $100 million. Car companies that take loans would have to limit pay and ban bonuses for their 25 most highly paid executives. They also would be barred from owning or leasing passenger aircraft or paying dividends to shareholders.

Taxpayers would receive stock warrants equal to 20 per cent of the aid. The US may end up holding a large stake in the automakers based on that provision. GM, with a market value of about $2.8 billion, is seeking $10 billion to survive until March 31.

GM shares trading in Germany were up 1.3 per cent at the equivalent of $4.66 as of 11:18 am local time on Thursday. Ford was little changed.

Senate Republicans emerged from a meeting yesterday with Vice President Dick Cheney and White House Chief of Staff Josh Bolten and said the measure doesn’t have enough support to clear a 60-vote legislative hurdle.