Obama staying out of auto-bailout debate

President-elect Barack Obama is staying out of the congressional fight over bailing out the U.S. auto industry, despite fading prospects on Capitol Hill for a major new federal rescue effort for Detroit’s struggling Big Three, a leading Senate Democrat said Wednesday.

“I can tell you flat out there will be no endorsement [by Mr. Obama] prior to January 20,” said Sen. Christopher J. Dodd, Connecticut Democrat and banking committee chairman, one day after his panel heard a combined appeal for billions of dollars in taxpayer help from the heads of General Motors Corp., Ford Motor Co., and Chrysler LLC.

Leading Democrats want to tap the recently approved $700 billion Wall Street bailout fund for a $25 billion “bridge loan” to help the beleaguered carmakers. But Republicans and some Democrats have expressed opposition to the idea, and say the car companies should use a $25 billion Department of Energy loan program that Congress has already approved.

The White House and Treasury Secretary Henry M. Paulson Jr. adamantly have resisted calls to use the Wall Street bailout funds to help the U.S. auto industry. They say the money is needed to deal with the global credit crunch and to bolster the still-shaky banking sector.

The GM, Ford and Chrysler executives made their pitch again before the House Financial Services Committee, amid growing signs that Congress will not approve an ambitious rescue bill for the industry before the lame-duck session adjourns in the next few days.

But the companies’ case was hurt when all three executives — Rick Wagoner of GM, Robert Nardelli of Chrysler and Alan Mulally of Ford — acknowledged during the hearing that they had flown to Washington in private jets for their lobbying mission.

“It’s almost like seeing a guy show up at the soup kitchen in a high hat and tuxedo,” said Rep. Gary L. Ackerman, New York Democrat. “Couldn’t you have downgraded to first-class or something, or jet-pooled to get here?”

Mr. Dodd said a number of senators were proving reluctant to support an immediate package for Detroit, with questions still to be addressed about how the deal would be structured, what conditions would be attached to the funds and whether a federal bailout is preferable to restructuring through the bankruptcy courts.

Senate Majority Leader Harry Reid, Nevada Democrat, appeared to signal that he lacked the votes to force through new auto industry aid in the coming days.

“If we can’t do it here legislatively, I would hope that the [Bush administration] would listen loud and clear because they could take this in their own hands and do what I think is appropriate,” he said in a statement on the Senate floor.

White House spokeswoman Dana Perino shot back that the White House would not be to blame if no help was approved.

“If Congress leaves for a two-month vacation without having addressed this important issue … then the Congress will bear responsibility for anything that happens in the next couple of months,” she said.

The three auto executives, backed by the head of the United Auto Workers union, have argued they are the largely innocent victims of the global credit crunch, which has sent car sales plummeting in recent months as consumers and dealers have been unable to obtain financing.

They warned that the bankruptcy of any one of the three big U.S. companies could drag them all down, given their interlocking financing and dealership networks. But members of both the House and Senate panels said the companies shared much of the responsibility for their present plight.

Senate Minority Leader Mitch McConnell, Kentucky Republican, said the White House-backed plan for a modified Energy Department loan to the car companies was “the only proposal being considered” that has any chance of passing the Senate.

Story Continues →