House Passes Auto Bailout Bill; On to U.S. Senate

(MoneyWatch)  The real fight over the proposed auto industry bailout can begin, now that the U.S. House of Representatives as expected passed its version of a bailout bill last night, Dec. 10, by a vote of 237 to 170.

The results are already ugly from the industry's point of view ?€" even before hostile Republican senators get their licks in. But as the automakers will be reminded repeatedly over the coming days, beggars can't be choosers.

In effect the House passed the smallest Band-Aid that the automakers said they could live with, while applying the most onerous conditions House Democrats could bring themselves to impose. Even House Speaker Nancy Pelosi, D-Calif., characterized the bill as "tough love."

For now, the bill is limited to $14 billion in bridge financing GM and Chrysler said they need, simply to survive past Dec. 31.

GM, Ford and Chrysler had asked for a combined total of up to $34 billion, in business plans the automakers submitted earlier this month. Since then, Ford said, "thanks, but no thanks" to short-term bridge loans. However, Ford is still interested in access to up to $9 billion in credit, just in case.

In return, the House bill imposes a presidential appointee, popularly dubbed the "car czar." Under the House bill, the car companies have until March 31 to submit another round of restructuring plans to the car czar, who must certify that the car companies are making "adequate progress" before approving any more money.

According to the bill, the restructuring plans must include proposals that would achieve, "long-term viability, international competitiveness and energy efficiency, including repayment of government financing, compliance with applicable fuel efficiency and emissions requirements, achievement of positive net present value, rationalization of costs and capacity, and proposals for restructuring existing debt."

It's only stating the obvious to say that if the car companies had answers to all those problems they wouldn't be in this predicament.

Failure to submit a plan that wins the car czar's approval means the car czar can demand immediate repayment of the government loan, which under the circumstances amounts to bankruptcy.

It's going to boil down to how fast does "adequate progress" need to be? The car companies already argue that their existing business plans will achieve all those ends ?€" long-term viability, international competitiveness, energy efficiency, etc. ?€" given enough time.