Hardline Republicans oppose bailout of auto 'dinosaurs'

Hardline Republican opponents of a US motor trade bail-out have branded the industry a “dinosaur” whose “day of reckoning” was near.

Hardline Republican opponents of a US motor trade bail-out branded the industry a “dinosaur” whose “day of reckoning” was near.

But Democrats pledged to do their best to get Detroit a slice of the$700bn Wall Street rescue in this week’s session of Congress.

The companies are seeking $25bn from the financial industry bail-out for emergency loans, though supporters of the aid for General Motors, Ford and Chrysler have offered to reduce the size of the rescue to win backing in Congress.

Senate Democrats intend to introduce legislation today attaching an auto bail-out to a House of Representatives-approved Bill extending unemployment benefits. A vote is expected as early as Wednesday.

A White House alternative would let the car companies take $25bn in loans previously approved to develop fuel-efficient vehicles and use the money for more immediate needs. But Congressional Democrats oppose the White House plan as shortsighted.

Majority Democrats will need at least a dozen Republican votes in the Senate to prevent opponents from blocking their measure, assuming all Senate Democrats support it.

So far two Republicans have publicly voiced support for the idea. Several others have indicated they might accept a rescue under strict conditions.

Republican senators Richard Shelby and Jon Kyl said it would be a mistake to use any Wall Street rescue money to prop up the car makers because it would only postpone the industry’s demise.

“Companies fail every day and others take their place. I think this is a road we should not go down,” said Shelby, the senior Republican on the Senate Banking, Housing and Urban Affairs Committee.

“They’re not building the right products. They’ve got good workers but I don’t believe they’ve got good management. They don’t innovate. They’re a dinosaur in a sense.”

Kyl, the Senate’s second-ranking Republican, said: “Just giving them $25bn doesn’t change anything. It just puts off for six months or so the day of reckoning.”

House of Representatives speaker Nancy Pelosi said the House would aid the ailing industry, though she did not put a price on her plan.

It is a more difficult fight in the Senate, given the Democrats’ slim edge and President George Bush’s opposition. Mr Bush wants to speed the release of $25bn from a separate loan programme intended to help the car makers develop fuel-efficient vehicles and have that money go towards more urgent purposes as the companies struggle to stay afloat.

The loan programme was approved by Congress last year, but more legislation would be necessary to change its purpose.

The disagreement raises the possibility that any help for car makers will have to wait until 2009, when president-elect Barack Obama takes office and the Democrats increase their majority in the Senate.

The companies are lobbying lawmakers furiously for an emergency infusion of cash. GM has warned it might not survive through the end of the year end without a government lifeline.

Obama says he believes aid is needed but that it should be provided as part of a long-term plan for a “sustainable US auto industry” – not simply as a blank cheque.

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