Congress and the Bush administration are moving toward agreement on a plan that would rescue the Big Three US automakers, a White House aide said.
General Motors Corp and Ford Motor Co shares jumped on optimism an agreement would give the industry at least $14 billion in loans. While the details and language are yet to be worked out, talks are “moving toward” an accord that President George W Bush can support, White House spokeswoman Dana Perino told reporters at a briefing on Monday.
US lawmakers are working to reach an agreement today on the loans that would be tied to conditions such as whether to replace executives and appoint a “car czar” to oversee the bailout. Senate Banking Committee Chairman Christopher Dodd predicted a plan would have the votes to pass.
“None of us want to wake up on January 1 and discover we don’t have an industry to save,” Dodd, a Connecticut Democrat, said yesterday on CBS’s “Face the Nation.” He said GM Chief Executive Officer Richard Wagoner should be replaced as a condition for the aid. “You’ve got to consider new leadership,” Dodd said. Wagoner, he said, “has to move on.”
Dodd’s Comments: GM spokesman Steve Harris said he didn’t interpret Dodd’s comments as making Wagoner’s exit a condition for aid, adding that the Detroit-based company’s management, employees and dealers “all feel like Rick is the right guy to lead us at this difficult time.”
President-elect Barack Obama said that if the management team “that’s currently in place doesn’t understand the urgency of the situation and is not willing to make the tough choices and adapt to these new circumstances, then they should go.”
“If, on the other hand, they are willing, able and show themselves committed to making those important changes, then that raises a different situation,” Obama said at a Chicago news conference on Sunday.
GM rose 62 cents, or 15 per cent, to $4.70 at 11:24 am in New York Stock Exchange composite trading, while Ford climbed 44 cents, or 16 per cent, to $3.16. Ford touched $3.25 earlier, the highest price in intraday trading since October 7.
An Administrator: Michigan Senator Carl Levin said he expects an administrator to be selected during the next 60 to 90 days who will make sure that “there will be real oversight.”
A draft proposal from the White House would create a “financial viability adviser” within the US Commerce Department that would be responsible for helping automakers achieve a plan for long-term financial success.
The adviser could provide financing to an automaker to keep operating for no more than three and a half months. The financing would be supplied only if the adviser concludes the automaker would otherwise go bankrupt during the period of negotiating the plan and if stakeholders are negotiating in good faith.
The prospect for aid improved December 5 when House Speaker Nancy Pelosi, a California Democrat, dropped objections to the Bush administration’s preference for tapping some of the $25 billion in 2007 Energy Department loans that had been targeted for making fuel-efficient vehicles.
Pelosi said she expects to bring legislation to the floor this week. The Senate plans to return to work today and the House reconvenes tomorrow.
Passage Uncertain: Passage is uncertain. Senator Richard Shelby of Alabama said he supports a filibuster, a procedural tactic to stall legislation by allowing endless debate. Sixty votes are needed to end filibusters.
“I think we need to debate it and that’s what filibusters allow and this week would be a good time to do it,” Shelby said on “Fox News Sunday.”
Alabama Republican Senator Jeff Sessions said on “Face the Nation” he has “doubts it will pass, but it’s a lot closer than it was” when automakers were asking for $34 billion.
GM’s 8.375 per cent bonds due in July 2033 rose 2 cents to 19 cents on the dollar, yielding 43.9 per cent, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority. Ford’s 7.45 per cent bonds due in July 2031 gained 2 cents to 25 cents on the dollar, yielding 29.9 per cent.
