Faced with the choice of bailing out the ailing auto industry or letting it fail, Congress picked a brave third option: procrastination.
Considering the mixed messages Capitol Hill sent on Thursday, that seemed the only appropriate approach. First, news spread midday that a group of bipartisan lawmakers had reached an agreement to provide Detroit with an infusion of $25 billion, with a victory press conference to be held at 2:30 p.m. Then, abruptly, House Speaker Nancy Pelosi and Senate majority leader Harry Reid cut the negotiators off at the pass by holding a hastily called press conference of their own in the same Senate room at 2:00 p.m. At that point, the Democratic leaders announced that they would not bring up the agreement for a vote yet. "What kind of a message do we send to the American people by having a bunch of failed votes here? We do not have the votes," Reid railed. (See the 50 worst cars of all time.)
From there, Reid and Pelosi detailed a series of hoops they expect the automakers to jump through to qualify for bridge loans from Congress. Ford, General Motors and Chrysler must present business plans to the House and Senate Banking Committees no later than Dec. 2. As part of that presentation, they must prove that, in the long run, they are "viable" companies that not only can repay whatever loans they receive but also can demonstrate that they won't need to come back and ask for more money. The two committees will hold hearings to vet the plans. If the plans are approved, Reid and Pelosi say they are willing to reconvene both chambers of Congress the week of Dec. 8 to pass a bailout. "Yes, we're kicking the can down the road, because that will give us the opportunity to do something positive. But that will only happen if they get their act together," Reid told reporters on Capitol Hill on Thursday.
Kicking the can down the road, however, isn't the kind of clarity Wall Street is looking for in these dire economic times. Coming a day after the Big Three CEOs' pleas on Capitol Hill dragged down the markets, Congress's muddled maneuvers on Thursday only made investors more anxious, pushing the Dow Jones down another 400-plus points and the broader S&P 500 index to an 11-year low. (See the Top 10 Dow Jones drops.)
For weeks now, the auto manufacturers, led by GM, have been warning that they are on the brink of bankruptcy. And they insist that in the current climate, without billions of dollars from Washington, bankruptcy would mean total liquidation, not the restructuring that many experts argue is the only real way to fix the industry. Given the complex, interdependent system of auto-parts suppliers, analysts warn that the loss of one of the Big Three could take down the entire sector and with it some 2.5 million U.S. jobs in a cascade effect.
But lawmakers, showing signs of bailout fatigue after the $700 billion financial-crisis package passed in September, have been left largely unimpressed by Detroit's cries for help. All week long, Senators and Representatives from both parties have lamented the decades of bad management that have put the auto industry in its current predicament: investing in SUVs when the rest of the world, eyeing the future oil crunch, was betting on smaller, more fuel-efficient cars; spending millions lobbying Congress to avoid regulation that would force tougher environmental standards; and giving its union unsustainably generous deals on salary and benefits that hobbled its ability to compete with Japanese and European carmakers. And the answers to these criticisms from the Big Three CEOs at two hearings, one before each chamber, went so badly this week that lawmakers cited their performances as reason not to give them any money.