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Detroit 3: The options

2008-12-05 07:39

US lawmakers are considering several options to help General Motors Corp , Ford Motor Co and Chrysler LLC, which have collectively asked for $34 billion in federal aid.

At a Senate Banking Committee hearing on Thursday, committee members discussed the following options with top executives of the three companies. The House Financial Services Committee holds a similar hearing on Friday.

* Congress does nothing and GM and/or Chrysler file for Chapter 11 bankruptcy protection.

Bankruptcy "is not a viable option because nobody is going to buy a car from a bankrupt company," said Sen. Charles Schumer, a New York Democrat.

* Congress does nothing and the companies file so-called prepackaged Chapter 11 bankruptcy petitions.

That approach "may be" worth considering, said Sen. Thomas Carper, a Delaware Democrat.

* Bush administration provides assistance to automakers from the Treasury Department's $700 billion Troubled Asset Relief Program (TARP), an idea endorsed by Democratic leaders but opposed by the White House and many Republicans.

* Congress or the Treasury Department requires US banks receiving TARP money to lend some of it to automakers.
"It's an idea that should be explored," said Gene Dodaro, the acting head of the Government Accountability Office, Congress' investigative arm.

* Congress approves short-term funding to help GM and Chrysler survive until March 31, then analyses whether their restructuring progress merits additional taxpayer dollars. GM said it needs about $12 billion through March 31 and Chrysler wants an immediate $7 billion.

"It's really tough to get people to keep following the game plan, I have learned, after the money leaves your hands," said Sen. Bob Corker, a Tennessee Republican.

* The Federal Reserve, which has broad powers to prevent systemic risk to the US financial system, helps automakers with their capital needs.

"I'm uneasy about that option but it certainly is an option," Carper said.

* Congress approves a bipartisan bill that would redirect an existing $25 billion fund for advanced fuel technology to be used for bridge loans to the automakers.

Sponsors Carl Levin of Michigan, a Democrat, and Christopher Bond of Missouri and George Voinovich of Ohio, Republicans, say the bill has enough votes to pass both the House and Senate.

* The federal government takes automakers' debt from financial institutions as the debt is restructured and possibly swapped for equity.

"It might go down a little better if the financial assistance were given to the financial institutions rather than to the auto companies, but the auto companies could receive significant relief," said Sen. Robert Bennett, a Utah Republican.

* Congress creates an oversight board to monitor any federal assistance to automakers, giving it broad powers similar to that of a federal bankruptcy judge. Similar entities were created to guide the 1979 bailout of Chrysler and to help US airlines following the 9/11 attacks in New York and Washington.

* The Bush administration or president-elect Barack Obama creates an auto czar to oversee any federal funding given to automakers. Schumer said he favoured this approach because creating an oversight board would take too much time.


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