Republicans balk as Obama urges car industry bail-out available (Roundup)

Dec 11, 2008, 19:17 GMT

Washington - US president-elect Barack Obama Thursday called on Congress to prevent a collapse of the country's automotive industry, but Senate Republicans were gearing up to block a legislative deal.

The House of Representatives approved a 14-billion-dollar emergency loan for the car industry Wednesday night, imposing strict oversight rules in exchange for keeping General Motors Corp and Chrysler LLC out of bankruptcy at least until April.

But Republicans argue the legislation still provides the loan without forcing tougher restructuring moves on the companies.

Obama, speaking at a Chicago press conference, said the automotive bail-out was vital for the US economy and urged the Senate to follow suit.

'At this moment of great challenge for our economy, we cannot simply stand by and watch this industry collapse. Doing so would lead to a devastating ripple effect throughout our economy,' said Obama, who has not taken an active role in the congressional negotiations.

Passage appeared less likely in the closely-divided Senate, Democrats hold only a 50-49 majority, and 60 votes will likely be needed due to a procedural measure that can be used by opponents to block legislation.

A vote could come as early as Thursday, but there may also be no vote at all as Democratic and Republican leaders continued haggling over the details.

Mitch McConnell, the top Republican in the chamber, came out in opposition to the House legislation on Thursday, dealing a significant blow to the bail-out's chances.

'We simply cannot ask the American taxpayer to subsidize failure,' McConnell said in a speech before the Senate, criticizing the legislature for being selective in its choice of which industries to rescue.

'A lot of Americans are asking where their bail-out is. They wonder why one business would get support over another,' he said.

The bill would create a White House-appointed 'car czar' who would oversee the companies' restructuring and have the authority to revoke the loan by March 31 if not enough progress was being made.

McConnell voiced support for an alternative proposal by Republican Senator Bob Corker. Among other things, Corker would force carmakers to immediately bring down labour costs to the level of Japanese competitors operating in the US.

But Corker's is only one of a series of Republican approaches. Senate Majority Leader Harry Reid, a Democrat, is pushing for Republicans to agree on one alternative solution that could be put up for a vote, according to Congressional Quarterly.

President George W Bush's administration backs the deal passed by the House, but the outgoing president has limited clout with his fellow-Republican legislators. White House press secretary Dana Perino said Bush would be telephoning key Republican Senate leaders throughout Thursday.

The carmakers have argued an emergency 'bridge loan' is needed to weather the US recession, which has sent car sales to a 25-year low in the past two months.

But many lawmakers blame the industry's struggles on a failure to streamline production and cut costs over the past decade as foreign competitors gained ground in the US market.