Dec 19, 2008 2:00 pm US/Eastern
Automakers To Get $17.4 Billion Boost
Treasury Secretary Henry Paulson Calls On Congress To Unfreez The Last Half Of $700 Billion Rescue
WASHINGTON (AP) ―
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After weeks of stalled deals and rumors of industry collapse, the White House finally stepped in to provide struggling automakers $17.4 billion in financial relief. (File)
AP
Citing imminent danger to the national economy, President Bush ordered an emergency bailout of the U.S. auto industry Friday, offering $17.4 billion in rescue loans and demanding tough concessions from the deeply troubled carmakers and their workers.
Detroit's Big Three cheered the action and vowed to rebuild their once-mighty industry, though they acknowledged the road would be anything but smooth as they fight their way back from the brink of bankruptcy.
The autoworkers union complained the deal was too harsh on its members, while Bush's fellow Republicans in Congress said it was bad business to bail out yet another big industry.
Bush, who signed the massive $700 billion rescue for financial institutions only this fall, said he was reluctant to approve yet another government bailout of private business. But he said that allowing the massive auto industry to collapse in the middle of what is already a severe downturn "could send our suffering economy into a deeper and longer recession."
Speaking at the White House, he also said he didn't want to "leave the next president to confront the demise of a major American industry in his first days of office."
President-elect Barack rcent of their pay and benefits for years. Early this month, the UAW agreed to suspend the program.
Meanwhile, Treasury Secretary Henry Paulson said Congress should release the second $350 billion from the financial rescue fund that it approved in October to bail out huge financial institutions. Tapping the fund for the auto industry basically exhausts the first half of the $700 billion total.
If the carmakers fail to prove viability by March 31, they will be required to repay the loans, which they would find all but impossible. A firm will be deemed viable only if it can show positive cash flow and can fully repay the government loans.
Friday's rescue plan retains the idea of a "car czar" to make sure the companies are keeping their promises and moving toward long-term viability.
The short-term overseer will be Paulson. But the White House deputy chief of staff, Joel Kaplan, said that if the Obama team wants someone else installed to bridge the administrations, Bush is open to that. Kaplan said there have been discussions with Obama's aides throughout the process.
The White House package is the lifeline desperately sought by U.S. automakers, who warned they were running out of money as the economy fell deeper into recession, car loans became scarce and consumers stopped shopping for their vehicles.
The carmakers have announced extended holiday shutdowns. Chrysler is closing all 30 of its North American manufacturing plants for four weeks because of slumping sales; Ford will shut 10 North American assembly plants for an extra week in January, and General Motors will temporarily close 20 factories -- many for the entire month of January -- to cut vehicle production.
General Motors CEO Rick Wagoner said in Detroit that GM had much work ahead t, and a failure of one of our competitors would have a ripple effect that could jeopardize millions of jobs and further damage the already weakened U.S. economy," Mulally said.
(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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