Showdown looms in Congress over possible automaker rescue

? Hardline opponents of an auto industry bailout branded the industry a “dinosaur” whose “day of reckoning” is near, while Democrats pledged Sunday to do their best to get Detroit a slice of the $700 billion Wall Street rescue in this week’s lame-duck session of Congress.

The companies are seeking $25 billion from the financial industry bailout for emergency loans, though supporters of the aid for General Motors Corp., Ford Motor Co. and Chrysler LLC have offered to reduce the size of the rescue to win backing in Congress.

Senate Democrats intended to introduce legislation today attaching an auto bailout to a House-passed bill extending unemployment benefits; a vote was expected as early as Wednesday.

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

Majority Democrats will need at least a dozen GOP votes in the Senate to prevent opponents from blocking their measure – assuming all Senate Democrats support it. Senate Republican Leader Mitch McConnell of Kentucky questioned whether there was sufficient Democratic support for an auto bailout in a statement released Sunday.

“The silence from the Democrat rank and file on this matter has been deafening,” McConnell said.

So far two Republicans publicly have voiced support for the idea. Several others, including Minnesota Sen. Norm Coleman on Sunday, have indicated they might accept a rescue under strict conditions.

Sens. Richard Shelby of Alabama and Jon Kyl of Arizona said it would be a mistake to use any of the Wall Street rescue money to prop up the automakers because a bailout would only postpone the industry’s demise.

“Companies fail everyday 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,” he said. “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.”

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

House Speaker Nancy Pelosi, D-Calif., said over the weekend the House would aid the ailing industry, though she did not put a price on her plan. “The House is ready to do it,” said Democratic Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee. “There’s no downside to trying.”

Frank’s committee has scheduled a Wednesday hearing on an auto bailout.

It is a more difficult fight in the Senate, given the Democrats’ slim edge and President George W. Bush’s opposition. Bush wants to speed the release of $25 billion from a separate loan program intended to help the automakers develop fuel-efficient vehicles and have that money go toward more urgent purposes as the companies struggle to stay afloat. The loan program was approved by Congress last year, but more legislation would be necessary to change its purpose.

“That should be done this week,” Commerce Secretary Carlos Gutierrez said. He said reopening the Wall Street bailout and including automakers could attract other industries looking for bailouts.

“If you start that, where do you stop?” he asked. “There’s a line of companies of industries waiting at Treasury just to see if they can get their hands on those $700 billion.”

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