December 10, 2008
DODD ANNOUNCES LEGISLATION TO STABILIZE, RESTRUCTURE, REFORM AUTO INDUSTRY
WASHINGTON, DC – Senator Chris Dodd (D-CT), Chairman of the Senate Committee on Banking, Housing and Urban Affairs, today made the following statement after finalizing legislation to stabilize the domestic automobile industry:
“This legislation will provide solutions to stabilize our domestic automobile industry so that our economy does not suffer a devastating blow and so that millions of American workers do not find themselves out of a job. It also takes tough measures to restructure and reform this industry. This bill is a far cry from a blank check to the industry. Rather, these companies will be required to pay back every dollar they borrow from hard-working American taxpayers. Furthermore, the legislation requires these companies to make painful, fundamental changes if they are going to be competitive internationally and viable in the long-term. And if they fail to make tough choices and reforms, they immediately have to repay their loan or line of credit, and face the full consequences of their failures.
“I wish that these companies had not gotten themselves into this situation, but we cannot travel back in time to correct their mistakes. At the same time, we cannot risk the economic damage that a failure of any one of these companies would cause, which is why I hope my colleagues will support this legislation. I look forward to continue working with Majority Leader Reid, as well as my Republican and Democratic colleagues, on this important effort.”
Click for copy of legislation. A summary of the bill is below:
Summary of the Auto Industry Financing and Restructuring Act
I. Stabilize the Economy with Short-Term Assistance to the U.S. Auto Industry
The failure of any of the “Big Three” auto companies – Ford, Chrysler, and General Motors – would have a highly detrimental effect on the nation’s economy. Independent analysis estimates that up to 2.5 million American jobs would be at risk if any one of these companies failed.
The Auto Industry Financing and Restructuring Act will provide up to $14 billion in bridge loans or lines of credit to these auto manufacturers in order to help them continue to operate in the near term. The bill uses funds that have already been allocated from Section 136 of the Energy Independence and Security Act. The President is required to designate at least one qualified individual to carry out the law.
II. Terms and Conditions
In order to be eligible for any taxpayer-backed assistance, the “Big Three” will be required to adhere to rigorous terms and conditions.
Each company will be:
· Held accountable to the short-term plan it submitted to Congress on 12/2/08;
· Required to pay interest at rates profitable to the U.S. government;
· Prohibited from paying bonuses or “golden parachutes” to highly-compensated employees;
· Prohibited from paying dividends on common stock;
· Required to provide warrants to the government, ensuring that taxpayers will benefit from any future growth the company may experience;
· Required to repay American taxpayers first, even if the company enters bankruptcy;
· Required to notify and allow the President’s designee to disapprove of any asset sale, investment, contract, or commitment of over $100 million;
· Required to sell its private planes;
· Required to devise a long-term strategy by 3/31/08 to repay American taxpayers, to become competitive internationally, to return the company to profitability, to streamline costs, to comply with federal fuel efficiency and emissions requirements, and to produce advanced technology vehicles and new products;
· Required to pay back loans early or forfeit lines of credit if the President’s designee does not approve the long-term strategy;
· Required to submit to aggressive oversight by the Government Accountability Office, a Special Inspector General, and the President’s designee, including by providing any information held by the company as well as its subsidiaries, affiliates, holding companies, and majority stakeholders.
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