The House has approved a $14 billion bailout for automakers, but the passage of the bill in the Senate remains uncertain.
The rescue package, which would immediately infuse General Motors and Chrysler with emergency loans, passed the House late Wednesday by a vote of 237 to 170. The vote occurred mostly along party lines; only 32 Republicans voted for it, and just 20 Democrats voted against it.
But the bill will have a tough fight in the Senate, where support among even some Democrats is uncertain. After the $700 billion bailout, which many lawmakers found distasteful but necessary, Congress is wearying of passing loan packages.
One contention by Republicans is that the auto industry could be served better by bankruptcy court, which has the power to undo existing contracts. They worry that a "car czar"—a political appointee who, according to the bill, would oversee the companies' restructuring—won't have the expertise or objectivity necessary for the role. One senator complained to the Washington Post that the "car czar" should be renamed "the president's puppet."
But Democrats oppose forced restructuring. They've said that with the Bush administration in power, it could threaten the United Auto Workers union. They also worry that if the companies go to bankruptcy court, buyers will be scared off.
Experts say that even if the rescue package passes, it will have to be just the first step. Loans or no loans, consumers have to be persuaded to buy again—and need to have better access to financing. A federal stimulus package to loosen up the credit market could help, as could a suggestion by the National Automobile Dealers Association that new car buyers be allowed to count auto loan interest and sales tax as income tax deductions.
General Motors and Chrysler have said that without emergency loans, they won't make it far into 2009. General Motors requested $8 billion and Chrysler asked for $7 billion—numbers adding up to much less than the total of $34 billion first requested. Ford isn't asking for the immediate loans, saying it's still viable.
But one forecasting firm has said that Chrysler is, essentially, a lost cause. Its sales aren't high enough, and the resources are not there for Chrysler, the smallest of the three companies, to be competitive, the firm said.
- Read more about why Congress might bail out the Big Three after all.