Congress, White House Near Agreement on Auto Aid, Frank Says

Congress, White House Near Agreement on Auto Aid, Frank Says

Dec. 8 (Bloomberg) -- Congress and President George W. Bush are negotiating the final details of a $15 billion measure to rescue domestic automakers without forcing the ouster of their chief executives, House Financial Services Chairman Barney Frank said.

The measure will likely be approved by Congress and signed into law this week, Frank said on CNBC. About $10 billion more aid may be needed to keep the companies operating through March, and Bush should tap some of the $700 billion financial-rescue package for additional aid, Frank said.

“We don’t want to see a total collapse of any or all of the auto companies at the most vulnerable period of the American economy since the Great Depression,” Frank said in a Bloomberg Television interview.

General Motors Corp. and Ford Motor Co. shares jumped on optimism an agreement would give the industry loans. GM and Chrysler LLC have said they need at least $14 billion combined to get them through the end of March.

Frank said that while legislation won’t require auto chiefs to quit, the Bush administration -- and in January President- Elect Barack Obama -- would have authority to determine whether a restructuring of the companies requires management changes.

White House spokeswoman Dana Perino told reporters at a briefing today that while the details and language are yet to be worked out, talks are “moving toward” an accord Bush can support.

Votes to Pass

Senate Banking Committee Chairman Christopher Dodd predicted yesterday a plan would have the votes to pass. “None of us want to wake up on Jan. 1 and discover we don’t have an industry to save,” Dodd, a Connecticut Democrat, said on CBS’s “Face the Nation.” Today Dodd told reporters, “We’re not done yet.”

He said GM Chief Executive Officer Richard Wagoner should be replaced as a condition for the aid. “You’ve got to consider new leadership,” Dodd said. Wagoner, he said, “has to move on.”

GM spokesman Steve Harris said he didn’t interpret Dodd’s comments as making Wagoner’s exit a condition for aid, adding that the Detroit-based company’s management, employees and dealers “all feel like Rick is the right guy to lead us at this difficult time.”

Obama said that if the management team “that’s currently in place doesn’t understand the urgency of the situation and is not willing to make the tough choices and adapt to these new circumstances, then they should go.”

“If, on the other hand, they are willing, able and show themselves committed to making those important changes, then that raises a different situation,” Obama said at a Chicago news conference yesterday.

Shares Jump

GM rose 67 cents, or 16 percent, to $4.75 at 1:07 p.m. in New York Stock Exchange composite trading, while Ford climbed 47 cents, or 17 percent, to $3.19. Ford touched $3.25 earlier, the highest price in intraday trading since Oct. 7.

Michigan Senator Carl Levin said he expects an administrator to be selected during the next 60 to 90 days who will make sure that “there will be real oversight.”

A draft proposal from the White House would create a “financial viability adviser” within the U.S. Commerce Department that would be responsible for helping automakers achieve a plan for long-term financial success.

The adviser could provide financing to an automaker to keep operating for no more than three and a half months. The financing would be supplied only if the adviser concludes the automaker would otherwise go bankrupt during the period of negotiating the plan and if stakeholders are negotiating in good faith.

Speaker Pelosi

The prospect for aid improved Dec. 5 when House Speaker Nancy Pelosi, a California Democrat, dropped objections to the Bush administration’s preference for tapping some of the $25 billion in 2007 Energy Department loans that had been targeted for making fuel-efficient vehicles.

Pelosi said she expects to bring legislation to the floor this week. The Senate plans to return to work today and the House reconvenes tomorrow.

Passage is uncertain. Senator Richard Shelby of Alabama said he supports a filibuster, a procedural tactic to stall legislation by allowing endless debate. Sixty votes are needed to end filibusters.

“I think we need to debate it and that’s what filibusters allow and this week would be a good time to do it,” Shelby said on “Fox News Sunday.”

Alabama Republican Senator Jeff Sessions said on “Face the Nation” he has “doubts it will pass, but it’s a lot closer than it was” when automakers were asking for $34 billion.

GM’s 8.375 percent bonds due in July 2033 rose 2 cents to 19 cents on the dollar, yielding 43.9 percent, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority. Ford’s 7.45 percent bonds due in July 2031 gained 2 cents to 25 cents on the dollar, yielding 29.9 percent.

BLOOMBERG