Party ties are strain on auto bailout

Intra-party rifts among senior members in the Senate are widening this week — just as the U.S. auto industry desperately needs them to close.

Sen. Dianne Feinstein (D-Calif.) is pressing Majority Leader Harry Reid (D-Nev.) to resist the current solution floating around Capitol Hill — reallocating the money Congress already approved but is intended to help the auto industry make more energy-efficient cars.

{mosads}But her colleague and fellow Democrat Sen. Carl Levin (Mich.) is pushing that proposal to aid the industry that drives his state’s economy. Levin issued a statement Monday evening calling the idea “great progress … Although there are still some unresolved issues, the bill represents important recognition that inaction is not an option.”

At the same time, Republican leader Mitch McConnell of Kentucky is quietly searching for ways to aid his state as well.  McConnell has said the Levin proposal is the only one that has a chance to pass, but he has not endorsed the bill.

But other top Republicans in the leadership with McConnell — such as John Cornyn of Texas, the incoming chairman of the National Republican Senatorial Committee, and John Thune (S.D.), the incoming vice chairman of the GOP conference — advocate letting the companies go into bankruptcy.

Other GOP senators, such as Jeff Sessions and Richard Shelby of Alabama, are also vocally promoting bankruptcy for the industry.

The rifts are crucial to any successful vote this week. Democrats will need significant support from Republicans to reach the necessary threshold of 60 votes, given the absences of President-elect Barack Obama, Vice President-elect Joe Biden and Sen. Edward Kennedy (D-Mass.) from the chamber. Democratic leaders were busy negotiating with the White House on Monday on a bill, even as a handful of senators took to the chamber floor to publicly urge such action.

Feinstein wrote both Reid and McConnell last month to urge against diverting money from the $25 billion in Energy Independence and Security Act (EISA) loans for automakers’ cash-flow needs, backing a long-held view by Speaker Nancy Pelosi (D-Calif.), until Pelosi dropped her opposition on Friday.

Feinstein pressed her point in a follow-up letter only to Reid, suggesting that more-efficient, environmentally friendly autos are more deserving of the help since they represent the future.

“I do not support disadvantaging the next generation of American automobile companies in an effort to save the first generation,” Feinstein wrote Reid.

Feinstein’s letter also noted that her own state is home to one such start-up company competing for a chunk of the $25 billion in EISA money: Tesla Motors of San Carlos, which has applied for $400 million. Feinstein also takes issue with an amendment Levin has pushed to restrict the loans to manufacturers that have existed for at least 20 years, arguing to Reid that Levin’s amendment would rule out any help for foreign and new companies.

“This is unacceptable to me,” Feinstein wrote.

A Feinstein spokesman said the California senator is still considering her position on this week’s bill and is merely promoting the idea of fuel-efficient technology, regardless of where it is developed or manufactured.

“The point is simple: American automakers — whether based in Michigan or California — should pursue fuel-efficient, next-generation technologies like hybrid and electric,” the spokesman said.

Diarmuid O’Connell, Tesla’s vice president for business development, says his Silicon Valley-area company needs the $400 million to manufacture electric batteries as well as a sedan. He takes pains to avoid any criticism of Detroit, but does echo Feinstein’s case that Tesla’s cars represent the next generation.

“We’ve never regarded this as an ‘us versus them’ situation, like ‘us against Detroit,’ ” O’Connell said. “We do think these [EISA] funds were set aside to inspire and incentivize the future.”

McConnell’s task is to protect an industry that represents 2.2 percent of his state’s workforce and 3.9 percent of its gross domestic product — more than $5.4 billion in 2005, according to the U.S. Bureau of Economic Analysis. Moreover, a recent University of Michigan study found Kentucky has the country’s third-highest level of auto industry-related employment as a percent of total state employment.

McConnell referred to that Monday in floor comments, during which he acknowledged deep worry about the auto industry.

“Americans are worried … about the possibility of another major convulsion coming from the auto industry — an important source of jobs throughout America, including my own state of Kentucky,” McConnell said.

In the middle of the debate are people like Jack Kain of Jack Kain Ford in Versailles, Ky., who said he believes McConnell will support the industry. Kain estimates he has more than $11 million invested in his Ford dealership and is anxious about the automaker going bankrupt.

“I certainly think he sees the plight of the dealer,” Kain said of McConnell. “I could lose absolutely half of what I have if I don’t have a Ford sign in front of my lot,” Kain said. “I’d just become a regular roadside business. We’re already selling about half of what we did a year ago.”