House approves $14 bn auto bill - bearish Senate vote pending

The U.S. House of Representatives passed a $14 billion bailout bill for the auto industry. This measure comes despite heavy opposition from the conservative Republican party in the States, which believes that the industry has caused itself irreparable harm, and that the majority of the damage was not caused by the current economic crisis.

Congressmen voted mainly along party lines with only 32 republicans in auto-producing states crossing the aisle. The final vote talley was 237 in favor of the bill, 170 against.

The bailout gives $14 billion in emergency loans to GM and Chrysler, but the automakers have to give in to government oversight by an "Auto Czar", and completely reorganize their company structures. Ford is not asking for the loans, but rather a $9 billion credit line in case they might need a loan down the line. Ford is believed to be in far better financial shape than the other two manufacturers. In exchange for the credit, Ford would also have to submit to the industry reforms. If automakers do not come up with a "viable" plan for their companies under a specific timetable, the Auto Czar will do the job for them.

The bill also contains provisions for the Auto Czar to block any deal valued at over $100 million, meant to prevent the automakers from moving jobs overseas. Also, failed loan payments could result in the U.S. taking an ownership stake in the manufacturers.

Any deal is far from confirmed, as the U.S. Senate has to approve a similar bill before the package gets sent to the White House. Once approved, President Bush would likely rubber stamp the measure. However, despite intense lobbying from the American president and his staff, Republican Senators have widely denounced the bill.

Many conservative Senators believe the auto industry should be allowed to fail, while others say the bill does not force automakers to reform their businesses in a way that guarantees profitability. One proposed conservative reform is the elimination, or reduction, of union contracts, something strongly opposed by labor-backed Democrats.

The Senate is split between 48 Democrats, 49 Republicans, and two Dem-leaning independents. Barak Obama's Senate seat is now vacant, as the President-Elect has resigned his office since winning the general election. A tie in the senate would be broken by current Vice President Dick Cheney, who would likely side with the White House and vote in favor of the bailout bill.

Also, Republican Senators from states that most need a thriving auto industry may also be persuaded to cross over. These Senators include George Voinovich of Ohio, Indiana's Dick Lugar and Pennsylvania's Arlen Spector, both of whom come from regions with strong ties to steel.

Adding to the Senate's problems is Senator Richard Shelby. The Alabama Republican is the senior conservative on the banking committee, and has called the bailout bill "a travesty." Senator Shelby has vowed to filibuster the bill, a block that would take 60 Senators to overturn. Shelby reportedly said, "This is an installment on a huge bailout that will come later."