Bailout Approved: Automakers To Get $17.4 Billion

WASHINGTON (AP) - Citing danger to the national economy, the Bush administration came to the rescue of the U.S. auto industry Friday, offering $17.4 billion in emergency loans in exchange for concessions from the deeply troubled carmakers and their workers.

At the same time, Treasury Secretary Henry Paulson said Congress
should authorize the use of the second $350 billion from the financial rescue fund that it approved in October to rescue huge financial institutions. Tapping the fund for the auto industry basically exhausts the first half of the $700 billion total, he said.

President Bush said, "Allowing the auto companies to collapse is not a responsible course of action." Bankruptcy, he said, would deal "an unacceptably painful blow to hardworking Americans" across the economy.

One official said $13.4 billion of the money would be available this month and next, $9.4 billion for General Motors Corp. and $4 billion for Chrysler LLC. Both companies have said they soon might be unable to pay their bills without federal help. Ford Motor Co. has said it does not need immediate help.

Bush said the rescue package demanded concessions similar to those outlined in a bailout plan that was approved by the House but rejected by the Senate a week ago. It would give the automakers three months to come up with restructuring plans to become viable companies.

If they fail to produce a plan by March 31, the automakers will be required to repay the loans, which they would find very difficult.

"The time to make hard decisions to become viable is now, or the only option will be bankruptcy," Bush said. "The automakers and unions must understand what is at stake and make hard decisions necessary to reform."

He said the companies' workers should agree to wage and work rules that are competitive with foreign automakers by the end of next year.

And he called for elimination of a "jobs bank" program - negotiated by the United Auto Workers and the companies - under which laid-off workers receive unemployment benefits and supplemental pay from their companies for 48 weeks. If they remain laid off beyond that, they move to a jobs bank in which the company provides about 95% of their pay and benefits. Until the most recent contract, people could remain in the jobs bank for years. Early this month, the UAW agreed to suspend the program.

Bush's plan is designed to keep the auto industry running in the short term, passing the longer-range problem on to the incoming administration of President-elect Barack Obama.

Paulson said that with the help for the carmakers, the government will have allocated the first half of the largest government bailout program in history.

He said he was confident that the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. have the resources to
address a significant market crisis if one should occur before Congress approves the use of the second half of the rescue fund.

Paulson said he would discuss the process with congressional leaders and Obama's transition team "in the near future."

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 cars.

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.

Bush said the auto manufactures have faced serious challenges for many years: burdensome costs, a shrinking share of the market and plunging profits. "In recent months, the global financial crisis has made these challenges even more severe," he said.

The president said that on the one hand, the government has a responsibility not to undermine the private enterprise system, yet on the other hand, it must safeguard the broader health and stability of the U.S. economy.

"If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers," he said.

"Under ordinary economic circumstances, I would say this is the price that failed companies must pay," the president said. "And I would not favor intervening to prevent the automakers from going out of business. But these are not ordinary circumstances.

"In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action."

Chrysler CEO Bob Nardelli thanked the administration for its help.

In a statement Friday morning, Nardelli said the initial injection of capital will help the company get through its cash crisis and help eventually return to profitability. He said Chrysler was committed to meeting the conditions set by Bush in exchange for the money.

Ford President and CEO Alan Mulally said his company would not seek the short-term financial assistance but predicted the aid would stabilize the industry.

"The U.S. auto industry is highly interdependent, 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.

General Motors said the short-term loans would help preserve jobs and "lead to a leaner, stronger General Motors."

"We know we have much work in front of us to accomplish our plan. It is our intention to continue to be transparent as we execute our plan, and we will provide regular updates on our progress," the automaker said.

(Copyright 2008 by The Associated Press. All Rights Reserved.)

You must be logged in to post comments.

Password (case sensitive):
Remember Me:

Read Comments

Comments are posted from viewers like you and do not always reflect the views of this station.
  • by sara on Dec 21, 2008 at 11:36 AM
    I agree with Karen. The government should have given the legal citizens the money instead of these major companies. They brought this mess upon themselves they have not decreased prices on the automobiles and they have taken away work from the citizens and sent it overseas causing our own citizens to be out of work. Anything that makes sense, a republican will not do. If it comes to helping the citizens of the U.S, the republican government will not help. They always want to help corporations, third world countries, and themselves while we all sit here with nothing.I have several family members who have lost their jobs due to NAFTA. Their factory work went to Mexico. You think Bush tried to stop it, NO. McCain said we need free trade. Thank Goodness Bush's little brother McCain did not get into office.
  • by Larry Location: Lexington on Dec 20, 2008 at 06:04 AM
    They shall return in 2009, for another payment. Which will be given by the New President, with open arms.
  • by Bill Location: Pike on Dec 20, 2008 at 05:52 AM
    Giving money away just makes money worthless.Let them eat cake.Our goverment is gone,no hope left for us.
  • by karen Location: morehead on Dec 19, 2008 at 06:33 PM
    i beleieve if president wanted to help, he should of gave eveyone in the us the money instead of auto maker;s. if he would of done it that way everybody would HAVE the money to buy new cars and new house's then everyone would of profited, auto maker & financial institutes, and the economy would be alright then
  • by Anonymous on Dec 19, 2008 at 05:06 PM
  • by grumpy on Dec 19, 2008 at 03:27 PM
    this is the first thing i have agreed with bush doing thanks
  • by Anonymous on Dec 19, 2008 at 03:01 PM
    People are complaining about a 17b dollar bailout when the real robbery happened 2 months ago, 1.2 Trillion dollars that just disappeared. Those lenders are just a hoot
  • by Kim Location: Frankfort on Dec 19, 2008 at 12:05 PM
    Talking as a concerned citizen of this country, I'm glad to see them made some kind of move to try to save this industry. If nothing is done, the effects of letting them fail will destroy our economy nationwide. Giving up your rice-burner cars would help a lot too.
  • by Stuart on Dec 19, 2008 at 12:03 PM
    The UAW is the next AMTRAK (a bottomless bit of money) continually paid to the industry in exchange for NOTHING!!!!
  • by jessnjohn Location: ky on Dec 19, 2008 at 11:51 AM
    Like they really needed the money we have enough cars aalready made to get by with in this so called recession ya!
  • Page:


2851 Winchester Rd. Lexington, Ky 40509 859-299-0411 - switchboard 859-299-2727 - newsroom
Register for Email
RSS Feeds
Copyright © 2002-2016 - Designed by Gray Digital Media - Powered by Clickability 36442364 -
Gray Television, Inc.