House approves $14 bn bailout package for auto industry
After hours of intense debate over the $14-billion dollar bailout package for the troubled US auto industry, the House of Representatives approved the bill 237 to 170. The legislation - to be tabled in the Senate, where it faces stiff Republican opposition - would provide money to cash-strapped General Motors, Ford Motor and Chrysler.
Loans made under this act will be for seven years, at an annual interest rate of five per cent during the first five years and nine per cent for the following two years.
Clearly, auto firms are in financial trouble after steep decline in their sales in the recent months. The legislation requires each eligible manufacturer to submit a long-term restructuring plan by March 31, 2009. GM, Ford and Chrysler have already presented their bailout proposals, worth up to $34 billion, to stave off a possible bankruptcy.
The bill allows US President George Bush to designate one or more officers - auto czars - to oversee the restructuring of the auto manufacturing industry and to ensure that they can achieve long-term financial viability.
The concern among several senators was that the auto czars would not have enough power to force the troubled automakers to restructure to become profitable. About this, Sen. Robert Bennett, R-Utah, said: “The car czar needs the authority to create a de facto structured bankruptcy. He needs the capacity of a master of bankruptcy to force things to happen.”
Though some senators say that the automakers should file for bankruptcy, White House spokeswoman Dana Perino pointed out that many lawmakers from both sides of the aisle believe that allowing “a disorderly bankruptcy could be fatal to US automakers and have devastating impacts on jobs, families and our economy.”