Hill leader says jobs report argues for car rescue

Skeptical lawmakers are weighing how to help the automakers as the once-mighty companies made last-ditch pleas to keep them from collapsing by year’s end and potentially deepening the nation’s already painful recession. Pictured, Chrysler CEO Robert Nardelli, right, shakes hands with Senate Banking Committee Chairman Sen. Christopher Dodd, D-Conn., on Capitol Hill Thursday after testifying before the committee's hearing on the auto industry bailout. (AP Photo/Gerald Herbert)

By JULIE HIRSCHFELD DAVIS
The Associated Press

12/5/2008

WASHINGTON — A key House chairman warned colleagues that inaction on an auto bailout “would be a disaster,” especially in light of Friday’s bleak new unemployment figures.

Congress was considering a range of options, including a government-run management board. But no plan seemed to be gaining much traction.

House Financial Services Committee Chairman Barney Frank, D-Mass., said “the country is held hostage” by the debate raging over how to help Detroit’s Big Three automakers — and the prospect of congressional paralysis.

CEOs of Detroit’s Big Three testified for a second day on why they needed an immediate infusion of up to $34 billion to survive, two weeks after they were sent home empty-handed and told to come back with more detailed plans of how they would spend the money and restructure their companies.

“We believe this is the least costly alternative,” Chrysler LLC chief executive Bob Nardelli told the panel.

Frank noted unemployment figures announced earlier Friday that reported the biggest monthly job loss in 34 years.

“For us to do nothing, to allow bankruptcies and failures in one or three of these companies in the midst of the worst credit crisis and the worst unemployment situation that we’ve had in 70 years would be a disaster,” Frank said.

Skeptical lawmakers are weighing how to help the automakers as the once-mighty companies made last-ditch pleas to keep them from collapsing by year’s end and potentially deepening the nation’s already painful recession.

The three auto CEOs appeared on Thursday before the Senate Banking Committee on the new $34 billion plan — up from the $25 billion they requested just two weeks ago.

“I don’t want to send you home again because it’s going to get more expensive,” joked Democratic Rep. Gary Ackerman of New York.

He told the automakers they faced “the fury of the American public” and that was making it harder for Congress to reach a consensus.

Employers slashed 533,000 jobs in November, shooting the unemployment rate to 6.7 percent, the Labor Department reported Friday.

Separately, GM said it would lay off about 2,000 more factory workers early next year as the U.S. auto sales slump continues to wreak havoc.

Under one proposed plan, the government would order a major restructuring of the domestic automakers in exchange for a multibillion-dollar bailout.

With several lawmakers in both parties pressing automakers to consider a pre-negotiated bankruptcy — something they have consistently shunned — members of Congress and the Big Three both were contemplating a government-run restructuring that would yield similar results, including massive downsizing and labor givebacks.

Despite the urgency of the automakers’ appeals and the prodding of congressional Democratic leaders, bailout fatigue was widespread on Capitol Hill and many lawmakers remained unconvinced they should support yet another rescue by taxpayers.

“We’re looking at a death sentence” for the auto companies, Sen. Chris Dodd, D-Conn., the Senate Banking Committee chairman, said Thursday. And while he pledged to try to help the Big Three, he added: “I’m not a miracle worker and no one here is.”

Finding the money was proving to be an uphill battle. Congressional budget analysts said one leading proposal — to use an already approved fund set aside for making cars environmentally efficient — would provide just $7.5 billion — a fraction of what General Motors Corp., Ford Motor Co. and Chrysler LLC say they need.

Democratic congressional leaders are leaning on President George W. Bush to tap into the already enacted $700 billion Wall Street bailout fund to aid the auto industry, arguing that a carmaker collapse would have a devastating impact on the financial firms the program is designed to help.

The Bush administration has said it has no intention of doing so, arguing that the money was supposed to be for financial institutions, and instead wants to convert the fuel-efficiency money into emergency loans.

Auto state lawmakers are threatening to block the administration from accessing the second half of the financial rescue fund unless it comes to the aid of the Big Three.

And President-elect Barack Obama wasn’t stepping forward with an alternative. Frank, who has been dealing with both the financial bailout and the auto rescue proposal as chairman of the House Financial Services Committee, said Obama is “going to have to be more assertive than he’s been.”

Associated Press writer Ken Thomas contributed to this report.