Proposed Auto Bailout Legislation Drop's Labor's Requirements

WASHINGTON, Jan 9, 2009; John Crawley writing for Reuters reported that legislation proposed on Friday to tighten the sweeping U.S. corporate bailout program omitted specific targets for labor concessions that were a key feature of last month's Bush administration rescue of distressed automakers.

A portion of the bill proposed by House Financial Services Committee Chairman Barney Frank sought to codify the auto bailout with terms, that with two exceptions, basically mirror those imposed by the White House when it extended $17.4 billion in emergency loans to General Motors Corp (GM.N) and Chrysler LLC.

Key changes proposed by Frank would ensure oversight of the auto rescue under a trustee or "car czar" and would eliminate language on steps the United Auto Workers union must take in coming weeks to try and reduce industry costs.

Under the Bush administration's bailout, carmakers and the UAW are to make "their best efforts" to reach an agreement on concessions to the 2007 contract in at least three areas.

GM and UAW officials are to meet on Monday.

The administration wants the UAW to end its "jobs bank," which pays furloughed workers, and accept half of corporate contributions to a retiree health care trust fund in stock rather than cash.

The most contentious issue in Bush's bailout plan is a goal that seeks to bring hourly wage costs in line with those of Toyota Motor Corp (7203.T) and other Japanese automakers operating nonunion factories in the United States.

The labor give-back provisions were spearheaded by Republican Sen. Bob Corker of Tennessee and incorporated into the bailout by the Republican White House and the Treasury Department.

While the union is open to some changes to help GM and Chrysler lower costs, the UAW as late as this week vowed to try and get the Obama administration to amend the giveback targets.

Obama, a Democrat, takes office Jan. 20.

"We do think those provisions are unwarranted and not part of the original agreement between the White House and Congress, and imposes a separate set of conditions on our members that are not imposed on other stakeholders," Alan Reuther, the union's legislative director said this week.

It is unclear how Frank's proposals would affect negotiations on auto concessions, if at all.

GM and Chrysler are under tight deadlines to show progress. They must demonstrate to the government within several weeks that they are lowering costs and making other changes required under the Bush administration's bailout plan.

Although Frank, a Massachusetts Democrat, is proposing a vote on his bill next week, it is unclear how the Senate would receive it, especially Republicans.

Separately, Frank's plan also seeks to formalize oversight of the auto bailout under a trustee or "car czar."

The administration included a trustee in its December bailout but opted against naming an official to administer the rescue and determine by late March whether GM and Chrysler are commercially viable and entitled to continued help.

The White House left open the option for Obama camp to name a czar, which the incoming administration is expected to do. A handful of names have surfaced with congressional officials signaling that an executive with Wall Street experience may be preferred.

Editing for Reuters by Carol Bishopric