U.S. unveils $17.4-billion in emergency auto ...

December 19, 2008

19 December 2008

U.S. unveils $17.4-billion in emergency auto rescue package

The following is excerpted from the 18 December 2008 edition of “globeandmail”.

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

The government will have the option of becoming a stockholder in the companies, much as it has with major banks, in effect partially nationalizing the industry.

At the same time, 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, he said.

President George W. 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.

Some $13.4-billion of the money will 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.

Mr. 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. The last $4-billion of the loans announced Friday would depend on release of the second half of the big Troubled Asset Relief Program fund.

Mr. 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 all but impossible.

General Motors Corp. CEO Rick Wagoner said in Detroit that GM had much work ahead but he was confident it could reinvent itself with the government help and even lead an economic recovery in America.

The president of the United Auto Workers, Ron Gettelfinger, said, “This will keep the doors of America's factories open, keep Americans working and prevent the devastating economic consequences for millions of Americans and thousands of businesses that would have resulted from a liquidation of operations by one or more auto companies.”

“The time to make hard decisions to become viable is now, or the only option will be bankruptcy,” Mr. 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 can receive about 95 per cent of their pay and benefits for years. Early this month, the UAW agreed to suspend the program.

Some congressional Republicans decried Friday's announcement.

House GOP leader John Boehner of Ohio called the deal “disappointing news” and said that by using federal TARP funds “Washington has failed both autoworkers and taxpayers.”

Under terms of the loan, GM and Chrysler must provide the government with stock warrants giving it the option to buy GM and C


Topic(s): 
World Economy & Politics
Information Source: 
Canadian News Channel / International News Channel
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