Aid in Hand, Clock Ticks for Detroit

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Bush Bails Out Automakers

The Bush administration came to the rescue of the troubled U.S. auto industry Friday, offering $17.4 billion in loans in exchange for concessions from car makers and their workers.

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Speaking at a news conference in Chicago to announce his latest Cabinet selections, he said: "There are going to be some painful steps that have to be taken. I just want to make sure that when we see a final restructuring package that it's not just the workers who are bearing the brunt of that restructuring."

Many stakeholders are hoping that Obama will alter aspects of the loan terms.

"While we appreciate that President Bush has taken the emergency action needed to help America's auto companies weather the current financial crisis, we are disappointed that he has added unfair conditions singling out workers," Ron Gettelfinger, president of the United Auto Workers, said in a statement. He said "We will work with the Obama administration and the new Congress to ensure that these unfair conditions are removed."

Steven Fader, chief executive of Mile One, which owns 65 dealerships and employs 3,500 people in the Mid-Atlantic region, said Bush's plan is a "good first step," but he expects that the plan "will be amplified by the new administration."

More money could be coming for the automakers. A spokesman for Canadian prime minister Stephen Harper said his government would announce a bailout package for GM and Chrysler on Saturday. Officials were negotiating the package Friday. Canada previously had promised to provide aid worth about 20 percent of any U.S. help.

In New York, Cerberus Capital Management, the private buyout firm that owns Chrysler, announced plans to hand over $2 billion in equity in the company's automotive operations to labor and creditors as part of its loan agreement with the U.S. government. "Cerberus believes that concessions by all relevant constituencies will be required to facilitate a full restructuring and recapitalization of Chrysler," the firm said in a statement.

Analysts said the danger was not over for the Detroit carmakers. "It's clear that the bankruptcy risk is not off the table," said Gregg Lemos Stein, associate director and auto analyst at Standard & Poor's. "It's been pushed back for at least a couple of months. But there are a number of potential threats out there that could cause these companies to seek a bankruptcy as early as the end of first quarter."

Senate Republicans, who a week earlier blocked a bill to provide rescue money from funds appropriated earlier to promote advanced technology for carmakers, condemned Bush's decision to move ahead with the bailout.

"Instead of pursuing the more responsible course to ensure that these companies restructure through Chapter 11 bankruptcy, the president chose to stick the taxpayer with the tab as he walks out the door," said Sen. Richard C. Shelby (R-Ala.). "I believe it is a shameful attempt by the president to protect his own legacy. The taxpayer will surely remember him for it."

Senate Majority Leader Harry M. Reid (D-Nev.) said he was pleased that the administration's plan "incorporates most of the terms of the agreement struck with Congress last week." He also noted that "important decisions will be left to the next administration to make or oversee."

Automobile dealership groups said that the White House plan, though providing only short-term relief, will help bring reluctant consumers back to car lots.

"Dealers and our customers have been living in a period of uncertainty, and that hasn't done anything to help the economy when consumer confidence was already at an all-time low," said Annette Sykora, the chairwoman of the National Automobile Dealers Association and owner of two Ford dealerships in west Texas.

Sykora said that fears that GM or Chrysler could go bankrupt had discouraged consumers worried about obtaining spare parts and fulfilling warranties in the future. That, she added, contributed to weak sales last month, the worst in 26 years.

Even with rescue loans, uncertainty surrounds the future of ailing brands owned by U.S. manufacturers. At a news conference, GM's president Frederick "Fritz" Henderson said the company hasn't decided whether it would sell the Saturn brand but it is still seeking to sell its Hummer and Saab brands.

Staff writer Dan Eggen and staff researcher Lucy Shackleford contributed to this report.