Auto Industry Financing and Restructuring Act of 2008
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|In December, 2008, pressure mounted on congressional leaders and President George W. Bush to pursue legislation that would provide emergency financial aid to U.S. domestic automakers. Representatives of the three leading U.S. carmakers -- Chrysler, Ford and General Motors -- twice testified before Congress, arguing that the U.S. recession left them close to failure. The automakers also told lawmakers that the failure of one firm would cascade through the industry -- parts suppliers, local shops and dealerships would all face ruin, and the other firms might be taken under as well.
Following the second round of testimony, congressional leaders agreed to a $15 billion series of emergency loans, with stringent oversight and a requirement that the manufacturers restructure business practices to return to profitability and repay the loans.
The Auto Industry Financing and Restructuring Act of 2008 (H.R. 7321) was introduced on December 10, 2008.
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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.
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.
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 exist between the legislation approved by the House and what the Senate will consider. Notably, the House requires 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 is expected to drop that provision.
Senate Republicans killed the bill in that chamber through the use of a filibuster, pushing any legislation on an automaker bailout into the next Congress and a new administration. 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.
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.
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- "Congress, White House nearing deal on $15 billion bailout for Big Three automakers," The Associated Press, December 9, 2008.
- Congress, White House near deal for $15 billion auto bailout -- but not quite yet. Associated Press, December 10, 2008.
- "Auto Industry Financing and Restructuring Act," House Financial Services Committee, Dec. 10, 2008
- C. Tierney, "Car czar to help steer restructuring," Detroit News, Dec. 9, 2008]
- "Congress, White House Talking $15B Bailout," The Associated Press,
- Lori Montgomery and Paul Kane, "Vote on Detroit Bailout Draws Near," The Washington Post, December 9, 2008
- Lori Montgomery and Paul Kane, "Auto Bailout Clears House but Faces Hurdles in Senate," The Washington Post, December 11, 2008
- Joseph J. Schatz, Phil Mattingly and Kathleen Hunter, "Auto Bailout Scuttled in Senate," CQ Politics, December 11, 2008
- Joseph J. Schatz and Phil Mattingly, "Auto Plan at an Impasse in Senate," CQ Politics, December 11, 2008
- Wikipedia article on the subprime mortgage crisis