Congress Nears Accord On Detroit 3 Bailout, Funds Would Come From Previously Approved Environmental Legislation

WASHINGTON December 5, 2008: According to Harry Stoffer, writing for Automotive News, Democratic leaders of Congress indicated this evening they have reached agreement on a bailout plan for the Detroit 3.

The agreement is designed to provide short-term loans to General Motors, Ford Motor Co. and Chrysler LLC to prevent an industry collapse and allow a comprehensive restructuring of the companies early next year, House Speaker Nancy Pelosi, D-Calif., said in a statement.

Congress is scheduled to vote on bailout legislation next week.

Democratic leaders also have reached agreement with the White House on the plan, a senior congressional aide told Reuters. The package totals between $15 billion and $17 billion, the aide said, speaking on condition of anonymity.

Pelosi suggested she was willing to fund the emergency loans out of a $25 billion package already approved to help automakers retool for fuel-efficient vehicles. Pelosi and Senate Majority Leader Harry Reid, D-Nev., had previously opposed that approach, which is favored by the Bush administration.

Under the agreement, Pelosi said she would demand "a guarantee that those funds would be replenished in a matter of weeks" and that automakers would not delay work on improved fuel economy.

The loans would allow the Detroit 3 to maintain operations until President-elect Barack Obama takes office Jan. 20.

Taxpayer protection

At hearings this week, GM CEO Rick Wagoner and Chrysler CEO Bob Nardelli said that without a combined $11 billion in emergency loans by year end, they would not have enough money to meet their financial obligations.

That funding was part of a $34 billion request for loans and credit lines.

Pelosi said that "Congress will insist that any legislation include rigorous and ongoing oversight to guarantee that taxpayers are protected."

The New York Times quoted Reid as saying he expected House and Senate "votes next week on a responsible plan to help the millions of Americans who rely on a healthy auto industry for their livelihoods."

But Reid added: "We will need support and cooperation from Republicans to determine what that vote happens and whether it will succeed."

Ford said in a statement Friday night that it is "encouraged" by the promise of congressional votes next next week.

As recently as Thursday, Pelosi and Reid had insisted that the Bush administration make the emergency loans to the Detroit 3 out of a $700 billion rescue fund for financial institutions. The administration said it did not have that authority.

Reuters contributed to this report