Bush offers no quick fix for auto industry Loans from $700B bailout are eyed

12/15/2008

WASHINGTON - The White House tossed out no lifeline for the teetering auto industry yesterday, although President Bush indicated he was considering using money from the $700 billion financial bailout fund to provide loans to the carmakers.

"An abrupt bankruptcy for autos could be devastating for the economy," Mr. Bush said early today aboard Air Force One during an unannounced trip to Iraq and Afghanistan. "We're now in the process of working with the stakeholders on a way forward. We're not quite ready to announce that yet."

He gave no timetable.

"This will not be a long process because of the economic fragility of the autos," Mr. Bush said.

The administration is considering ways to provide emergency aid to General Motors Corp. and Chrysler LLC, which have said they could run out of cash within weeks without federal aid.

Lawmakers making the rounds on U.S. television networks yesterday said they ex-pect the administration to act soon to ward off a collapse of the U.S. auto industry, which could lead to millions of job losses and inflict even greater pain on the recession-mired U.S. economy.

Sen. Bob Corker (R., Tenn.), who blocked legislation that would have provided $14 billion in loans to the automakers, said he had spoken with the White House early yesterday.

"I don't think they yet know what they're going to do," Mr. Corker said.

United Auto Workers President Ron Gettelfinger, the top labor union official, said on CNN's Late Edition that his organization was in talks with the administration but has been given no sense of timing of any relief.

The aid is expected to benefit General Motors and Chrysler and discussions involve the amount of funding and any potential conditions.

Ford Motor Co. has said it has enough cash to survive 2009 but asked Congress for a line of credit in case the financial markets deteriorate further.

"I'm optimistic they're going to do something significant. I don't think the White House wants bankruptcy at one of the Big Three automakers as part their legacy," Sen. Sherrod Brown (D., Ohio) said.

Last week, Congress failed to approve a plan that would have provided short-term financing to the industry and create a "car czar" who would ensure that the money would transform the Detroit automakers into competitive companies.

The administration, following the legislative defeat, said it was considering several options, including using money from the $700 billion financial bailout fund to provide loans to the carmakers.

Mr. Corker and other Republicans sought a compromise that would have insisted the carmakers restructure their debt and bring wages and benefits in line with those paid by Toyota, Honda, and Nissan in the United States. The legislation died when Republicans demanded upfront pay and benefit concessions from the United Auto Workers that union leaders rejected.

Sen. Debbie Stabenow (D., Mich.) said on Fox News Sunday that Republican leaders in the Senate did not want an agreement and said the loans were needed to buy time for the companies to restructure.

"Manufacturing is on the edge in this country. This is not the time for a political agenda," Ms. Stabenow said.

The administration has several options.

It could tap the $700 billion financial rescue bailout fund to provide loans to the carmakers or use part of that fund as a kind of collateral for emergency loans the automakers could get from the Federal Reserve.

The administration also could do nothing, leaving open the possibility that one or more of the automakers could go bankrupt.

Michigan Gov. Jennifer Granholm, a Democrat, said other countries provide aid to their automakers and the loans were essential to help make the United States less dependent on foreign oil.

If the companies don't get help, "we'll be replacing our reliance on foreign oil with a reliance on foreign batteries because it's going to be the battery that's driving the electric vehicle in the future," she said on NBC's Meet the Press.