Text of Bush's statement on auto industry rescue
Friday, December 19, 2008; 10:02 AM
-- Text of President George W. Bush's remarks delivered Friday at the White House on financial assistance to troubled auto makers:
BUSH: Good morning.
For years, America's automakers have faced serious challenges; burdensome costs, shrinking share of the market and declining profits. In recent months, the global financial crisis has made these challenges even more severe.
Now, some U.S. auto executives say that their companies are nearing collapse and that the only way they can buy time to restructure is with help from the federal government. It's a difficult situation that involves fundamental questions about the proper role of government.
On the one hand, government has the responsibility not to undermine the private enterprise system. On the other hand, government has a responsibility to safeguard the broader health and stability of our economy.
Addressing the challenges in the auto industry requires us to balance these two responsibilities. 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.
Under ordinary economic circumstances, I would say this is the price that failed companies must pay. 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. The question is how we can best give it a chance to succeed.
Some argue the wisest path is to allow the auto companies to reorganize through Chapter 11 provisions of our bankruptcy laws and provide federal loans to keep them operating while they try to restructure under the supervision of a bankruptcy court.
But given the current state of the auto industry and the economy, Chapter 11 is unlikely to work for American automakers at this time. American consumers understand why. If you hear that a car company is suddenly going into bankruptcy, you worry that parts and servicing will not be available and you question the value of your warranty.
With consumers hesitant to buy new cars from struggling automakers, it would be more difficult for auto companies to recover. Additionally, the financial crisis brought the auto companies to the brink of bankruptcy much faster than they could have anticipated. And they have not made the legal and financial preparations necessary to carry out an orderly bankruptcy proceeding that could lead to a successful restructuring.
The convergence of these factors means there is too great a risk that bankruptcy now would lead to a disorderly liquidation of American auto companies. My economic advisers believe that such a collapse would deal an unacceptably painful blow to hardworking Americans far beyond the auto industry. It would worsen a weak job market and exacerbate the financial crisis. It could send our suffering economy into a deeper and longer recession.