Auto Industry Financing and Restructuring Act of 2008

Current Status


Background
On December 9, 2008, negotiators revealed the terms of an emerging deal between the White House and Congress under which a short-term, $15 billion bailout for the Big Three would be overseen by a federal "car czar" or trustee. By December 10, it appeared the deal had been accepted in principle with only a few details to be ironed out. It was still not clear, however, whether the Senate would agree to this arrangement. On December 10, 2008, the House Financial Services Committee released a copy of the proposed financial bailout package for GM, Ford, and Chrysler. The bill proposes the appointment of 'Car Czar' to oversee automakers' restructuring efforts, and restricts executive bonuses. It prohibits executive golden parachute packages and requires automakers to sell or divest themselves of any privately owned or leased aircraft.

Congressional Democrats and the White House reached agreement on about $15 billion in emergency loans for the embattled U.S. auto industry. Sources in both parties say the breakthrough on the long-stalled bailout came after House Speaker Nancy Pelosi bowed to President George Bush's demand that the aid come from a fund set aside for the production of plug-in hybrids. The CEOs of General Motors, Ford and Chrysler have sought $34 billion in loans. The lesser amount reportedly is meant to tide them over until Barack Obama assumes the presidency.

Bill Summary
The Auto Industry Financing and Restructuring Act of 2008 (H.R. 7321) is legislation providing $14 billion in emergency loans to eligible U.S. automakers. As a condition of the loans, participating firms must restructure their business operations. One or more administrators (or car czars) would be appointed to oversee the loans. Firms would have to submit plans to these administrators by March. If the administrator does not approve a firm's plan, the loans could be withdrawn immediately. The car czar could then order further restructuring or require the automaker to enter into Chapter 11 bankruptcy.

House vote
On December 10, 2008, the House approved the auto-bailout bill by a 237-to-170-vote margin. Members of the House with domestic manufacturing plants within their districts voted for the legislation. Members whose districts employ workers at foreign carmakers' plants voted against the bailout.



Differences existed between the legislation approved by the House and what the Senate considered. Notably, the House required that the manufacturers drop lawsuits against the State of California, which has enacted mandatory fuel-efficiency limits more stringent than those specified by the federal government. The Senate was expected to drop that provision.

Senate vote
With the House bill unlikely to pass the Senate, supporters of an auto industry bill in the Senate attempted to use the Alternative Minimum Tax Relief Act (H.R. 7005), which had already passed the House in September 2008, as a so-called "shell" bill to which would be added a different version of the auto industry bill. However, negotiators in the Senate were unable to reach a compromise on a new proposed version of the auto bill and the plan failed when the Senate rejected a cloture motion that would have allowed them to proceed to consideration of the auto bill by a vote of of 52-35 on December 11, 2008.



Members voiced several reasons for voting against cloture. Minority Leader Mitch McConnell (R-Ky.) said oversight measures included in the legislation were not stringent enough. Sen. Bob Corker (R-Tenn.) tried to introduce a substitute amendment requiring the companies receiving loans reduce their debt obligations by two-thirds. GOP senators also called on the companies to reduce wages and benefits for employees at the firms to the level of those employed by foreign-based firms.

Employees of the Big Three firms, represented by the United Auto Workers, agreed to make some concessions regarding pay and pensions, but wanted to meet a 2011 deadline. GOP Senators called on the reductions to be made by March 2009.

Americans for Democratic Action, which supported cloture, selected the vote for their 2008 Senate scorecard, where they gave it the following description: "Motion to invoke cloture, limit debate, and vote on a bill related to the alternative minimum tax, which would serve as the vehicle for an emergency loan package for domestic automakers. Failing to receive the required 60 votes, the Motion was rejected 52-35"

The Drum Major Institute also supported cloture and selected the vote for its 2008 Senate scorecard, where it gave the following description: "The automobile industry is a critical component of the American economy. Motor vehicle and parts industries employed over 700,000 people directly as of September and each job in the auto industry supports about 1.7 additional jobs in industries as diverse as textiles and retail. The Economic Policy Institute predicts that a worst-case-scenario shutdown of the entire U.S. auto industry would eliminate 3.3 million jobs—many of them solid middle-class positions. Most experts agree that bankruptcy in the current liquidity crisis would be devastating to the auto manufacturers: already weak sales would be exacerbated by consumers frightened to buy from a bankrupt manufacturer, and lending institutions normally accessible to bankrupt companies are now unavailable. As an alternative, this legislation imposes reasonable restructuring requirements, while ensuring that middle-class jobs are preserved in a period of deep economic crisis. The bill will prevent the short-term failure of the automobile industry in the United States and makes a leaner, more energy-efficient Detroit possible. An auto czar cannot make the Big Three automakers profitable. But the czar’s influence—backed up by the capacity to speed loan repayment and impose bankruptcy—and the thorough restructuring guidelines laid out by Congress can ensure that the American automakers do not once again fail to confront environmental concerns and recalcitrant management."

Articles and resources
''Wikipedia also has an article on the Auto Industry Financing and Restructuring Act of 2008. This article may use content from the Wikipedia article under the terms of the GFDL.''

External articles

 * Wikipedia article on the subprime mortgage crisis