Detroit Bailout: Democrats Toughen Up

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Loosening the restrictions on the energy-bill loans, a measure now being pushed by Senate Banking Committee Chairman Christopher Dodd (D-Conn.), and supported by key Republicans, would make that money immediately accessible without having to apply it directly to costs associated with greener cars.

GM is facing the most critical financial meltdown of the three U.S. companies. Last week, the company's senior management told members of Congress that its chances of lasting until Obama takes office were just 50-50, according to one Senate staffer who was present for the meeting. GM has just $16 billion in cash and could run short by the end of the year, the company said on Nov. 7. Chrysler CEO Nardelli said last week that his company would not survive a recession without government loans.

The auto industry and the UAW have long faced opposition by GOP lawmakers. At the root, says former Labor Secretary Robert Reich, who is also part of Obama's transition team but said he was not speaking for the President-elect, is the support and money organized labor funnels to Democratic candidates. "Republicans aren't opposed to bailing out industries, just certain ones," says Reich, who noted regular GOP support for the pharmaceutical industry and Wall Street.

Labor Pains

Reich said he believed some of the GOP opposition to making the loans to the auto industry were "undoubtedly designed to break the union." Democrats and the Obama Administration support the Employee Free Choice Act, which would allow workers to vote by a nonsecret ballot to unionize. Labor organizers believe the measure will make it easier for the UAW to unionize foreign-owned assembly plants, as well as other businesses that fight union organizing. Republicans are vehemently against the bill. Reich said the bill would probably become a talking point for negotiations between the parties on an auto bailout.

But one Washington lobbyist close to the discussions says that Democrats in Congress won't budge on the bill. If the Republicans vote against an auto industry bailout over the union-organizing legislation, Democrats will use it to take their seats in the upper Midwest in the midterm elections, said the lobbyist, who asked not to be named.

Executive compensation and accountability also will be talked about. The bill that is not expected to pass nevertheless contains provisions that are a template for any government assistance to Detroit. It calls for a halt to "golden parachute" deals for senior management, no bonuses for executives making more than $250,000, and stock warrants that would give the Treasury equity in the companies.

Kiley is a senior correspondent in BusinessWeek's Detroit bureau. Welch is BusinessWeek's Detroit bureau chief.