Detroit Bailout May Bring On U.S. Oversight

By DAVID M. HERSZENHORN and JACKIE CALMES Published: December 7, 2008

WASHINGTON - Congressional Democrats on Sunday were weighing options for tight government control of the crippled American auto industry, including the possible creation of an oversight board made up of five cabinet secretaries and the head of the Environmental Protection Agency, and led by an independent chairman or "car czar."

President-elect Barack Obama talked to Tom Brokaw on "Meet the Press."

Whatever oversight entity is created, it would direct the drastic reorganization plans that the auto companies have said they were willing to undertake in exchange for billions of dollars in short-term government loans to keep them in business, according to a senior Congressional aide. A main factor complicating the deliberations was the imminent transition between the Bush and Obama administrations.

The discussions of how strong a hand the government should take with the auto industry came as Congressional and White House negotiators sought to put the final touches on emergency bridge loans of about $15 billion to keep General Motors, Chrysler and Ford afloat. The final legislation is also expected to impose stringent taxpayer protections, including stock warrants that would give the government an equity stake in the three firms, new limits on executive pay and a ban on stock dividends while the loans are outstanding.

Once a bill offering aid to the industry is completed by Congressional Democrats and the White House, it must still win the approval of Senate Republicans. Senator Carl Levin, Democrat of Michigan, one of the auto industry’s biggest supporters said on Sunday it was uncertain that the plan would get the 60 votes needed to advance in the Senate.

President-elect Barack Obama, whose transition team has been involved in the auto talks, made starkly clear in an interview and at a brief news conference on Sunday that any aid to the Big Three auto companies should not come without significant concessions.

"They’re going to have to restructure," Mr. Obama said in an interview on "Meet the Press" on NBC. "And all their stakeholders are going to have restructure. Labor, management, shareholders, creditors - everybody is going to recognize that they have - they do not have a sustainable business model right now, and if they expect taxpayers to help in that adjustment process, then they can’t keep on putting off the kinds of changes that they, frankly, should have made 20 or 30 years ago."

Still, the bill seemed likely to stop short of authorizing the broad powers that some lawmakers had urged to allow what could have amounted to an out-of-court bankruptcy proceeding, in which the automakers creditors could be forced to accept reduced payments, labor contracts could be rewritten and executives could be summarily dismissed.

For his part, Senator Christopher J. Dodd, the chairman of the Senate banking committee that is drafting the legislation, called for the dismissal or resignation of Rick Wagoner, the chief executive of G.M., which is the most imperiled of the automakers.

"I think you’ve got to consider new leadership," Mr. Dodd said Sunday in an interview on "Face the Nation" on CBS. "If you’re going to really restructure this, you’ve got to bring in a new team to do this, in my view."

Asked specifically about Mr. Wagoner, Mr. Dodd said: "I think he has to move on."

A G.M. spokesman, Steve Harris, said that the company was grateful for Mr. Dodd’s assistance and that the company was willing to accept tough oversight in exchange for government aid, but that it retained confidence in Mr. Wagoner.

"We appreciate Senator Dodd’s support in trying to provide some assistance for the industry, but General Motors’ employees, dealers, suppliers and the G.M. board of directors feel strongly that Rick Wagoner is the right person to continue the transformation of the company that he began and has presented plans to Congress to continue and accelerate," Mr. Harris said.

All of the legislative proposals under consideration made clear that Congressional Democrats and the White House, furious over the need for yet another huge corporate bailout, intended to make the auto manufacturers pay a price far greater price than the 5 percent interest on the emergency loans.

Congressional Democrats said that if any of the companies failed to meet government requirements by the end of March, the emergency loans could be called in for immediate repayment.

At the news conference in Chicago, Mr. Obama reiterated his position that it would be unacceptable for the government to allow the auto industry to collapse. But using somewhat tougher language than he has before, he said it "makes no sense for us to shovel more money into the problem" if the companies are unwilling to reorganize.

Rahm Emanuel, who will be Mr. Obama’s White House chief of staff, said after the news conference that Mr. Obama did not mean by his use of the term "restructuring" to suggest a bankruptcy-like financial overhaul, but rather that they need to retool to manufacture more fuel-efficient automobiles and ensure future profitability.

The Bush White House, in its proposal for an auto rescue plan, called for the creation of a "financial viability adviser" within the Commerce Department charged with negotiating a "long-term financial viability plan" for each of the auto companies.

If such a viability plan could not be negotiated, the White House proposal called for allowing the adviser to mandate one.

Democrats were weighing various counterproposals calling for the creation of a full oversight board, made up of the secretaries of commerce, energy, labor, transportation and of the Treasury, as well as the administrator of the Environmental Protection Agency.

Many lawmakers in both parties said they were troubled by the Bush administration’s handling of the $700 billion financial system rescue program, which Congress approved hastily in October. Several lawmakers said they did not want to be pressured again into spending billions of taxpayer dollars to rescue private companies.

"I think Congress is tired of being stampeded," Senator Jeff Sessions, Republican of Alabama, said on "Face the Nation." "We haven’t even seen a bill yet. So I think there’s still a lot of skepticism out there."

David M. Herszenhorn reported from Washington, and Jackie Calmes from Chicago. Peter Baker and John M. Broder contributed reporting from Washington, and Bill Vlasic from Detroit.