White House aid to automakers rankles GOP

Tension bubbled Friday among Republicans as GOP senators criticized the Bush administration’s decision to tap the $700 billion Wall Street rescue package to save U.S. automakers.

Sen. Bob Corker (R-Tenn.), a lead negotiator who had nearly convinced the United Auto Workers (UAW) to accept sweeping reform of the industry, including lower wages in the near future, said Congress had a chance to return to the bargaining table Friday.

{mosads}Once Democrats and the union heard the White House would cave in to demands to release money from the Troubled Asset Relief Program (TARP), all incentive to negotiate further vanished.

“We would have had a whole lot better chance of agreement if the White House hadn’t said they’re getting ready to put money in,” Corker told a group of reporters after a news conference.

Sen. Judd Gregg (N.H.), the Republican who in the fall took the lead for his party negotiating TARP, criticized White House officials for planning to use those funds to bail out the Big Three.

“These funds are to be used to stabilize the financial system of the country — they are not for specific businesses experiencing stress,” Gregg said in a statement. “This is especially true when one considers that these auto companies have deep cost structure and product quality issues which have little to do with the present economic slowdown.”

Corker said that Ron Gettelfinger, the president of the UAW, halted discussions after receiving indication from White House officials that they will use funds from the TARP to save U.S. automakers.

Senate Republicans’ failure to reach a deal with Democrats and their union allies casts doubt on whether carmakers will be required to accept restructuring conditions they agreed to Thursday.

A GOP senator involved in Thursday’s negotiations said that the UAW had agreed to reduce the bulk of their outstanding debt through an equity swap with bondholders and to accept corporate stock as 50 percent of the payments to union accounts for retired and disabled workers.

Those concessions may not happen because Senate Republican and Democratic negotiators could not reach agreement on a third major issue: reducing employee labor and benefit costs of U.S. automakers to par with foreign competitors.

Corker told reporters Friday that Democrats and Republicans might still have reached agreement if talks had continued. He said, however, that changed when White House officials indicated they were poised to tap TARP to save the automakers.

Corker said he had put a call in to Treasury Secretary Henry Paulson and would urge Paulson to attach to the relief at least two of the conditions Democrats and Republicans had agreed to Thursday.

Corker declined to say that Republicans had missed an opportunity by not yielding on autoworkers’ wages, the issue that scuttled the bailout package. He said many Democrats also wanted to see the industry required to reduce its debt, such as through equity swaps with bondholders and/or equity contributions to Voluntary Employee Beneficiary Associations.

White House officials sought to assure the financial markets shortly before they were scheduled to open Friday.

“[G]iven the current weakened state of the U.S. economy, we will consider other options if necessary – including use of the TARP program — to prevent a collapse of troubled automakers,” said White House spokeswoman Dana Perino in a statement issued minutes before markets opened.

Gregg said White House action would “set a new precedent that the next administration may use to aggressively assert industrial policy and expand government control into numerous specific businesses that are having troubles during these difficult times.”

But Sen. George Voinovich (Ohio), a key GOP supporter of the auto bailout, said it would have been very difficult for lawmakers to reach a deal on legislation. Voinovich preferred from the beginning that the White House directly assist the auto manufacturers, but understood his colleagues had reservations.

“Frankly speaking, my feeling early on was that they [the administration] should have dealt with it through the TARP but they didn’t want to set a precedent,” Voinovich said. 

One group that Voinovich feels may be unfairly blamed for sinking any prospective deal is the UAW.

“I do not believe that this thing went down because of the United Auto Workers,” Voinovich said. “They should be given credit. It showed that the UAW understands the critical nature of where we are today in this country and they don’t want to be part of the problem.” 

Senate Republicans and Democrats were on the cusp of an agreement Thursday night before talks fell apart and Republicans blocked a motion to proceed to debate on the aid package. Corker and Gregg both voted against proceeding to a bill that had failed to garner the support of most Republicans.

Corker said once Gettelfinger received indication that federal aid was coming, he did not see a need to continue negotiations.

There is still, however, a chance that administration officials will require automakers to meet certain conditions in exchange for federal aid.

House Speaker Nancy Pelosi (D-Calif.) sent a letter to President Bush on Friday asking him to require carmakers to include strong taxpayer protections and set conditions for economic viability and competitiveness with the TARP funds.

“The administration must now require, as a condition of receiving those taxpayer funds, the same tough accountability and shared sacrifice by all parties — executives, unions, suppliers, creditors, dealers, bondholders and shareholders — mandated in the bipartisan legislation passed by the House this week,” Pelosi wrote. 

Silla Brush contributed to this article.

This article was updated at 5:01 p.m.