$15B could help automakers now, but what about later?

— -- An industry that relies on deals is on the verge of closing its biggest ever.

Crafting of legislation to funnel $15 billion in emergency loans to General Motors and Chrysler was in its final stages Tuesday. Though the beleaguered car companies are in no position to argue, the bill assumes they have made serious mistakes and need a government-run overhaul to avoid financial thin ice again.

House Speaker Nancy Pelosi touted the notion of a 'car czar' to supervise an auto industry bailout, saying Tuesday that Big Three executives haven't adapted well to changing conditions.

"I think it's very important," Pelosi told NBC's "Today" show, because little would be accomplished if company executives are "left to their own devices."

"Well, whether we need it or not, I think it's reasonable that when the federal government steps in with taxpayer money, they're not going to ... lend us the money and just say, 'Do the best you can with it and tell us when you need more,' " said Robert Lutz, GM's vice president of global product development. "Obviously, there's going to be some kind of oversight and I think that's a reasonable thing to expect," he said on CBS's "The Early Show."

Just getting the outline of a deal required hurdling strong arguments in Congress and elsewhere that the government should let the weakest auto companies fail, then help pick up the pieces, if necessary.

"I have my doubts how this can be fixed, short of a bankruptcy," Sen. Jeff Sessions, R-Ala., said Monday afternoon while arguing against any bailout loans.

He said a bailout would be like enabling an alcoholic to keep drinking via well-meaning but eventually destructive handouts.

Others in Congress have complained they've had too little time to study the auto industry deeply and worry there won't be proper controls on the loan money.

Still, lawmakers and the White House seemed swayed by the enormity of potential damage. As calculated in the proposed bill, the loans would protect 355,000 U.S. auto jobs and an additional 4.5 million in related industries. It also would safeguard retirement and health care benefits for a million retirees and dependents.

Sessions' anti-bailout view is easy to understand. His state is home to Honda, Mercedes-Benz and Hyundai manufacturing plants, which build products that compete with Detroit automakers.

Others, with and without dogs in the fight, said the loans might help, but that the strings attached would complicate — or prevent — the automakers' recovery. And government aid as proposed would be a type of U.S. industrial policy that — intended or not — could determine winners and losers.

"Any time the government provides resources, there is a temptation to have strings attached," said Vincent Reinhart, resident scholar at the American Enterprise Institute, a conservative think tank. Reinhart, who capped a 25-year career at the Federal Reserve as director of monetary affairs, said, "It really shows the veneer to free-market capitalism is pretty thin."

'A little more reason'

On the other hand, a government overseer, if well-informed, could "bring a little more reason to the debate rather than the emotions that are out there right now," said David Cole, chairman of the Center for Automotive Research. "The level of knowledge out there is slightly zero-plus."

The auto industry has collapsed in the past few months with a breathtaking suddenness. Detroit was scrambling to shift gears to crank out more small cars and fewer big trucks in reaction to record fuel prices in July, only to slam into the teeth of a credit crisis and deepening recession that's keeping shoppers out of showrooms.

General Motors and Chrysler have gone from warning they were heading for problems to hitting the panic button and heading for the lender of last resort: Uncle Sam.

Ford Motor mortgaged itself in 2006 to raise cash and says it can get through 2009 without an emergency loan. Even so, it's asking the government for a $9 billion line of credit, in case GM or Chrysler fail or things get worse.

GM says it needs $4 billion before year's end, $4 billion in January and an additional $10 billion in loans and credit lines next year.

In a statement, GM acknowledged the bill's provision for unusual government controls, but said, "The current set of extraordinary economic circumstances the industry faces requires equally extraordinary action now on both the part of the automakers and Congress. … We will abide by the conditions proposed in the bill and will continue our restructuring with great urgency."

Chrysler, which says it needs $4 billion now and an additional $3 billion next year, said late Monday it "is pleased that progress is being made. The legislation announced today recognizes Chrysler's need for an immediate, short-term working capital bridge to get us through this liquidity crisis."

Without the loans, the car companies say, they won't have enough money on hand to simply meet their daily expenses. The auto business is capital-intensive. GM, for instance, needs about $14 billion in cash to keep running.

The $15 billion in emergency loans from the government would be intended to carry the car companies through the first quarter next year. Then, the incoming Barack Obama administration would be responsible for either hammering out a longer-term plan or letting the free market decide Detroit's fate.

The draft legislation calls for the government to move to the head of the line of creditors in case of a default. Scott Talbott, senior vice president of government affairs at The Financial Services Roundtable, a trade association, says the banking industry isn't bothered by becoming secondary creditors.

"We are supportive of the deal, even though it weakens our position in the short term," he said. "In the long run, making the automakers stronger will help the economy, and we're all in this economy together."

Still, he said, more needs to be done to help the automakers' lending operations — GMAC, Ford Credit and Chrysler Credit: "If people can't get credit to buy the cars, this might all be for naught."

The legislation enabling the loans became a magnet for auto activists.

"Congress should assure we get environmental benefits out of this program. This is the way we can hold their feet to the fire," said Roland Hwang of the Natural Resources Defense Council. "Otherwise, they will go back to their gas-guzzling ways."

He was referring to a provision that would prohibit any automaker taking federal loans from suing states that enacted tougher laws about greenhouse-gas emissions.

A major greenhouse gas is carbon dioxide, and the amount of carbon dioxide emitted is directly related to the amount of fuel a vehicle uses. Thus, automakers have argued, regulating carbon dioxide is a sly way to regulate fuel economy. By law, only the federal government can do that.

MoveBeyondOil.org, a group that advocates finding alternatives to petroleum fuel, wanted automakers to be forced to make 50% of their cars run on ethanol, methanol or natural gas by 2012 and 80% by 2015.

"The automakers never miss an opportunity to miss an opportunity," said Peter Forman, founder of MoveBeyondOil. "The failure to include flex-fuel standards for vehicles keeps the auto industry and the American people dependent on unreliable and hostile sources of fuel."

Restrictions workable

The government oversight and other restrictions that would accompany the loans are workable for auto companies desperate for money, says a crisis management expert.

"I don't see that as a deal-breaker," said Van Conway, president of Conway MacKenzie & Dunleavy in Birmingham, Mich., just outside Detroit. The government could "be micromanaging, but I don't know how that stops the business from going forward." He adds that automakers "are going to run the business as they see fit."

The reins could have been tighter. One version of the bill gave the federal overseer the power to force an automaker into bankruptcy.

Sen. Carl Levin, D-Mich., a Detroit backer, said he's happy to see that what appeared late Monday to be the final version omitted that draconian scenario and other "provisions that would have created great problems."

The bill, he said, "shows a path we can move forward on, and I am cautiously optimistic that we will reach an agreement that can get the necessary votes in the Congress."

The most crucial group — Wall Street investors, who have hammered the automakers' stocks lately — found hope in the legislation and bid up the shares. Ford closed at $3.38, up 66 cents, or 24%. GM closed at $4.93, up 85 cents, or 21%.