White House Moves Toward Auto Bailout
Saturday, December 13, 2008
The Bush administration yesterday moved to pull Detroit's automakers back from the brink, saying it would drop its opposition to tapping the $700 billion financial industry rescue package to help General Motors and Chrysler survive through year's end.
The White House said it would explore all financing options, including drawing on the Treasury's Troubled Asset Relief Program, which until now has been used exclusively to aid banks and other financial firms. The automakers and some members of Congress were also hoping that the Federal Reserve would make a loan to aid the firms and preserve tens of thousands of jobs. But the Fed has strongly resisted such entreaties and has said it would be "extremely reluctant" to lend to the companies.
"We need these loans, and we're not particularly fussy about how we get the loans or where they come from," said GM board member George M.C. Fisher, retired chief executive of Eastman Kodak.
The White House announcement set off new rounds of negotiations over the terms of federal aid, such as whether the Treasury would require management changes and how big an equity stake the government would demand in return for the use of taxpayer funds.
General Motors and Chrysler say they need the money to avoid running out of cash before the end of the year and to avert a domino effect that would threaten the viability of a variety of smaller companies that supply parts to the big manufacturers.
The moves follow the Thursday night breakdown of talks in the Senate, where most Republicans had demanded that the United Auto Workers make wage concessions that would bring members' pay down to the level of nonunionized workers at foreign-owned automobile plants.
UAW President Ronald A. Gettelfinger lashed out yesterday at Republicans who he said were blaming labor unions for the defeat of a rescue package they opposed all along. He said the GOP senators, some of whom come from states with foreign-owned, nonunion auto plants, wanted "a twofer" that would "pierce the heart of organized labor while representing the foreign brands."
Gettelfinger said that the UAW had "already stepped forward and made enormous concessions" and that "as we made it clear last night, we were prepared to make further sacrifices. But we could not accept the effort by the Senate GOP caucus to single out workers and retirees for different treatment and to make them shoulder the entire burden of any restructuring."
Even as it said it would step up to aid auto companies, the Bush administration expressed its reluctance to do so.
"Under normal economic conditions, we would prefer that markets determine the ultimate fate of private firms," said White House spokeswoman Dana Perino. "However, given the current weakened state of the U.S. economy, we will consider other options if necessary -- including use of TARP -- to prevent a collapse of troubled automakers. A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time."
New signs of the industry's deterioration appeared yesterday.
GM said it would idle about 30 percent of its North American production during the first quarter, lowering output by about 250,000 vehicles. Honda said that it would slash North American production by 119,000 vehicles and that its production would finish the year down 12 percent from 2007.