Congress Struggles to Find Rescue Plan for Automakers

Congressional leaders seized on grim new unemployment data on Friday to try to rally support for a rescue plan of up to $34 billion for automakers. But while lawmakers pondered a range of options, including a government-run management board, no individual plan seemed to be gaining much traction.

AP Ron Gettelfinger, Alan Mullaly, Robert Nardelli, and Rick Wagoner

House Financial Services Committee Chairman Barney Frank, D-Mass., said failure of Congress to act now to help Detroit's Big Three "would be a disaster."

Senate Majority Leader Harry Reid, D-Nev., said the Labor Department's report of 533,000 job losses in November—the biggest job loss in 34 years—makes the auto bailout even more urgent.

"We must ... prevent the auto companies from collapsing, or we risk adding millions of more Americans to the unemployment line," Reid said, noting that "more than 10 million workers (are) already unemployed."

Still, Reid said that "any help must include specific requirements that ensure viability and strong oversight" of the industry.

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 chief executive Bob Nardelli told the House Financial Services Committee.

Frank said Friday's unemployment figures were just one more reason for a government bailout.

"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.

CNBC confirmed that Chrysler, thought the most fragile of the three, has hired the Jones Day law firm as its bankruptcy counsel. But a company spokesperson suggested the automaker hired the advisor in order to get independent analysis that would back its contention that bankruptcy was a poor choice for Chrysler.

"During the initial congressional hearings in November, the automotive industry was asked to study why bankruptcy was not a better alternative for restructuring, versus the working capital bridge loans requested," the spokesperson said, adding that the evaluation determined that bankruptcy's effect on the automotive industry would be "devastating." For more on Chrysler bankruptcy speculation, see the accompanying video.

Lawmakers are weighing how to help the automakers as the once-mighty companies teeter on the edge of collapse.

Congressional leaders have urged the Bush administration to do more to help the industry, and have called on the Federal Reserve to give the auto companies the kind of low-cost loans the central bank has been awarding to financial firms.

Outside the Capitol, auto suppliers representing 50 states and wearing blue hockey jerseys emblazoned with the number of supplier jobs in their states gathered.

"This is not a bailout. This is a loan that will help us recover for the future," said Jim Seta, 37, who works at a Gainesville, Ga., plant owned by supplier SKF. The plant employs 320 and makes bearing parts for transmissions used in General Motors vehicles.

Poll: What would you do?

• Would You Buy a Car From a Bankrupt Manufacturer?

Supporters of the auto makers said they were hopeful that the industry's dire outlook was starting to sway lawmakers. "I think we've turned the corner where we've now made the case that this is serious, this is real and something needs to happen," said Sen. Debbie Stabenow, D-Mich.

The three CEOs from General Motors , Ford Motor and Chrysler appeared before the House panel after testifying for nearly six hours on Thursday before the Senate Banking Committee on their new $34 billion plan—up from the $25 billion they unsuccessfully requested just two weeks ago.

CNBC.com Big 3 Bailout

"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.

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.

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."

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