Aid For Carmakers Stalls; Now What?

House Speaker Nancy Pelosi of Calif, second from left, gestures during a news conference on Capitol Hill in Washington, Thursday, Nov. 20, 2008 AP Photo/Gerald Herbert

On Capitol Hill, hope for a "sooner then expected" financial bailout of U.S. automakers faded quickly.

"Until we can see a plan where the auto industry is held accountable, we cannot show them the money," said House Speaker Nancy Pelosi, D-Calif.

The Democrats said the aid plan lacked the support to pass Congress and be signed by President Bush.

Mr. Bush and congressional Republicans had balked at Democrats' suggestion to draw emergency auto industry loans from the $700 billion Wall Street rescue fund. And most Democrats were unwilling to go along with a separate, bipartisan effort backed by the White House to temporarily divert an existing program to help carmakers produce vehicles that burn less gasoline to cover the companies' immediate financial needs.

The best Congress could offer: General Motors Corp., Ford Motor Co. and Chrysler LLC have to come up with a plan for rebuilding and modernizing their industry that's convincing enough to persuade skeptical lawmakers that they should get a federal lifeline. Deadline: December 2.

"We want them to get their act together. We want them to come up with something," said Senate Majority Leader Harry Reid, D-Nev.

"Think of us as a venture capital firm," suggested Sen. Chris Dodd, D-Conn., the Senate Banking Committee chairman. "And we're asking them, 'What are you going to do if you get this investment from us?'"

The White House criticized the delay, saying the plan to let the automakers tap the fuel-efficiency loans for their short-term cash needs should be considered.

"If there are lawmakers who want to help the automakers, and they have a path to do so, why are they going to kick the can down the road?" said Dana Perino, the White House press secretary.

So far, the companies - clobbered by lackluster sales and choked credit - have painted a grim picture of what would happen if they don't get aid. GM has said it could go under before year's end, and Chrysler might not be far behind. Ford has said it can survive through 2009, but it's unclear how much longer - and if even one company were to collapse, it could cause a cascade and devastate the rest.

"Without immediate assistance, we could see, and I stress 'could see,' a collapse of one or more of the domestic auto companies by the end of this year," warned United Auto Workers President Ron Gettelfinger.

Failure of one or more of the Big Three would be another severe blow to the battered economy - and to many Americans' view of the nation's industrial strength - and throw a million or more additional workers off the job.

With the unemployment rate soaring past 10 million, and with an additional 1.6 million American jobs tied to the auto industry, the U.S. government might not have a choice than to rescue Detroit.

"This is a situation where the economy is on its knees," said Nariman Behravesh, chief economist at IHS Global Insight, on CBS' The Early Show, "where the last thing you need is for an industry to go under, for a big company like GM to go under."

It wasn't all bad news yesterday. Congress raced to approve legislation to keep unemployment checks flowing through the December holidays and into the new year for a million or more laid-off Americans whose benefits are running out, which in the short term could be good news.

Beyond the auto industry, lawmakers said the public has little appetite for anything else that smacks of a bailout, following the backlash against the $700 billion financial rescue.

"There is a sense that we did not do a good enough job of safeguarding the use of those funds, or providing prevention against abuse. And you could not get, I believe, through either house of Congress today what some people might think was a repeat. That's why we need to take time," said Rep. Barney Frank, D-Mass.

Even if lawmakers return to vote, they are likely to insist on numerous conditions on any loans. Democrats and Republicans alike want the government to get a chance to share in future profits by the auto companies, require them to limit executives' pay packages and prohibit use of the funds for lobbying or paying shareholders dividends.

In scrapping plans for a vote this week, the Democratic leaders sidetracked a bipartisan agreement to temporarily divert the fuel-efficiency funds to cover the auto companies' operations.

Sen. Carl Levin, D-Mich., said that plan had a "reasonable chance" of passing, and that the leaders' decision to delay it was "risky and unnecessary."

"We need speed. This is a very, very important moment," Levin said.

Popular on CBS News

Comments

Watch CBSN Live

Watch CBS News anytime, anywhere with the new 24/7 digital news network. Stream CBSN live or on demand for FREE on your TV, computer, tablet, or smartphone.

Watch Now

New Android App

For your Android phone and tablet, download the FREE redesigned app, featuring CBSN, live 24/7 news.

Download