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Sen. Mitch McConnell, the Senate Republican leader, agrees with President Bush that $25 billion earmarked in an earlier financial plan should be used to make loans that Ford, General Motors and Chrysler have requested. Under the original plan, the money was to be used for retooling plants so they could increase production of fuel efficient autos.
U.S. Sen. Jim Bunning opposes the $25 billion package, saying it isn't even a short-term solution to automakers' financial problems.
"If we give them $25 billion, it would only be the first installment," Bunning said Tuesday during a telephone news conference with Kentucky reporters. "They will be back in January asking for more."
Bunning said a dramatic drop in new car sales has been caused by a tightening of the credit market which makes it difficult for people to get loans.
Until banks and lending institutions are stabilized and able to make more loans, Bunning said, the problem in the auto industry won't be solved. "It is related to a much large economic problem," he said.
McConnell doesn't support a bill that Democratic leader Sen. Harry Reid introduced Monday. Reid proposes allocating an additional $25 billion, and not redirect the $25 billion approved earlier this year.
"A number of our (Republican) members think the proposal that the administration has made -- to basically change the qualifications of the money that we have already appropriated -- is a sound way to go forward," McConnell said. "I was told earlier today that there is some Democratic support for that as well."
He said the $700 billion rescue package approved last month was designed to restore the credit system, not serve as a precedent for industry-by-industry relief.
He said there is a way to help the auto industry without a separate bill. He promised to work closely with Reid to reach a compromise that could be voted on as early as today.
Bunning said that rather than making loans to the auto industry, the market for autos should be energized by Congress' offering tax incentives to car buyers. He suggested incentives include a tax credit of up to $15,000 for those who buy new or used cars and allowing taxpayers to deduct the sales tax on those vehicles from their income tax.
Bunning also said that car manufacturers need to restructure the way they do business. He said they must reduce labor costs to be in line with foreign companies that build cars in the U.S., reduce the number of models and brands, produce more efficient cars, and reduce the numbers of dealers and vehicles.
Bill Bartleman can be contacted at 575-8651.
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