President Bush rescues automakers
Friday, December 19, 2008
WASHINGTON (AP) — Citing danger to the national economy, the Bush administration came to the rescue of the U.S. auto industry Friday, offering $17.4 billion in emergency loans in exchange for concessions from the deeply troubled carmakers and their workers.
At the same time, Treasury Secretary Henry Paulson said Congress should authorize the use of the second $350 billion from the financial rescue fund that it approved in October to rescue huge financial institutions.
President 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.
One official said $13.4 billion of the money would 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.
The Detroit Three employ nearly 100,000 people at plants around Ohio. "I am grateful the president stepped in to help thwart a disaster that would have sent our state over the cliff," U.S. Sen. George Voinovich, R-Ohio, said in a statement Friday.
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 very difficult.
"The time to make hard decisions to become viable is now, or the only option will be bankruptcy," Bush said. "The automakers and unions must understand what is at stake and make hard decisions necessary to reform."
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 White House package is the lifeline desperately sought by U.S. automakers, who warned they were running out of money as the economy fell deeper into recession, car loans became scarce and consumers stopped shopping for cars.
The carmakers have announced extended holiday shutdowns. Chrysler is closing all 30 of its North American manufacturing plants for four weeks because of slumping sales; Ford will shut 10 North American assembly plants for an extra week in January, and General Motors will temporarily close 20 factories — many for the entire month of January — to cut vehicle production.
Bush said the auto manufactures have faced serious challenges for many years: burdensome costs, a shrinking share of the market and plunging profits. "In recent months, the global financial crisis has made these challenges even more severe," he said.
The president said that on the one hand, the government has a responsibility not to undermine the private enterprise system, yet on the other hand, it must safeguard the broader health and stability of the U.S. economy.
"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," he said.
"Under ordinary economic circumstances, I would say this is the price that failed companies must pay," the president said. "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."
Chrysler CEO Bob Nardelli thanked the administration for its help.
In a statement Friday morning, Nardelli said the initial injection of capital will help the company get through its cash crisis and help eventually return to profitability. He said Chrysler was committed to meeting the conditions set by Bush in exchange for the money.
seriouslyfolks (anonymous) says...
It's interesting that this is all being put on Bush and the house and senate's hands are squeaky clean. When this fails this will be another thing to blame on one person(Bush) while other responsible parties stand and point fingers at him with us as if they are completely innocent. I'm glad the great scapegoat is leaving. I wonder who will be next.
I voted third party by the way. In case you were wondering.
December 19, 2008 at 10:12 a.m. ( permalink | suggest removal )
trainrech (anonymous) says...
I'm really tired of the phrase "Too big to fail". I think it should be replaced by "Donated too much to my campaign to fail".
The Big 3 have been consistently under-performing for the last decade. They have not presented anything which would lead me to believe that a loan would help them survive. Instead I believe a loan does nothing but prolong an inevitable demise. Not so great for Joe Taxpayer - come March when they call the notes there won't be anything to repay the notes back with. I really hope this isn't the case, so Detroit, please prove me wrong.
December 19, 2008 at 11:04 a.m. ( permalink | suggest removal )
Free4all (anonymous) says...
The American auto industry is an old dying dinasaur that needs revamped. Feeding the same old animal will not change anything. The airlines had to revamp how they do business and so has many other industries. Let them go through chapter 11, restructure and get on with what needs to be done. We might see one or two fall but in its place one or two could merge but the chapter 11 will give them protection while doing what needs to be done. Thanks Bush for covering your butt with our money till you leave in a month.
December 19, 2008 at 11:05 a.m. ( permalink | suggest removal )
HenryVIII (anonymous) says...
I agree that the industry needs to be revamped. If we keep saving them, they’ll never learn to fix anything. Why not let them go bankrupt and let some innovative startup company take their place?
December 19, 2008 at 11:12 a.m. ( permalink | suggest removal )
madpoet (anonymous) says...
The auto industry is linked to so many others, it's scary. Just this week in Manhatten, KS about 50 people are getting their pink slips at a factory that makes rubber hoses for cars etc. You have to think of all the stuff that goes into cars from parts to paint that is made by independent companies and how many people are employed by them. Then all the car dealership employess too. My brother-in-law just lost his job at a St. Louis car dealership last month. And he worked the parts counter, a safe bet, you'd think. I think someone needs to go in and streamline the car companies and cut out all the graft. And the workers will have to take a pay cut to avoid losing their jobs. I know that's harsh but they're making almost $5 more an hour in pay and benefits than the foreign car companies pay their US workers. Everyone is going to have to tighten belts or it's all going to go under and we'll be in even worse shape.
December 19, 2008 at 11:50 a.m. ( permalink | suggest removal )
seriouslyfolks (anonymous) says...
Observation
Too true, too true.
Since the Democrats have all the answers and Bush is to blame for everything our concerns will surely be short lived.
December 19, 2008 at 11:59 a.m. ( permalink | suggest removal )
trainrech (anonymous) says...
So it'll be the incoming Democrat administration's fault if the bail out sponsored and signed by the Republican administration doesn't work?
Seems like the conservatives on this board want to have their cake and eat it to...
I personally don't care who came up with this package (I'm as Centrist as they come), but I'll be pleasantly surprised to see either a good plan or a repayment in 3 months.
December 19, 2008 at 12:54 p.m. ( permalink | suggest removal )
goodoleboy (anonymous) says...
Now why did we have to through partisianship into the mix? And why are you die hard repubs not ripping either Bush or Repubs in congress on this since neither could come to a consensus on this topic, at least the Dems are standing together, its hard to get a clear picture of just what and where the repubs stand for now days. It's hysterical to me that your already harping on the Dems, Bush and Paulson thought they had the solution to this problem too, lot of good that did eh?
December 19, 2008 at 12:58 p.m. ( permalink | suggest removal )
seriouslyfolks (anonymous) says...
goodoleboy
You apparently didn't red both my posts. I'm an independent and am not sticking up for Bush. I'm simply saying that all the blame for everything doesn't lie on only his two shoulders. The Democrats have had a hand in the government and it's doings in the last eight years. They are not as innocent as you wish them to be. These are not sports teams and we should not be blindly loyal to them as if they were. Please do not put all your hopes in a single political party, Republican or Democratic. We desperately need a third or even a fourth party so we can stop this blind loyalty to one of two parties that are way too similar.
December 19, 2008 at 1:24 p.m. ( permalink | suggest removal )
Free4all (anonymous) says...
Rep. or Dem. it doesn't matter, this is just a finger in a dike that is collapsing. If they go chapter11 yes we may loose 1 of the big three but the demand for vehicles will still be out there. The void will be picked up by one of the others or someone new. I see this as like keeping an old textile factory from 1900 going because of tradition and it employess a few thousand. Some businesses fall and some will grow and some will be born. That is the nature of the beast, yes it sucks but nothing is forever in life. We have to change and adapt to the times or sit stagnant and let other countries take advantage of our sitting on our thumbs.
December 19, 2008 at 1:28 p.m. ( permalink | suggest removal )
goodoleboy (anonymous) says...
Seriously,
I am independant the same as you, my post was aimed more at the people like Observation. Look who injected partisanship into this discusson.... Facts are that from 1992-2006 Republicans controlled Congress, and from 2000-2008 they had the White House. There are faults on both sides I concede that but is it not illogical to hold Repubs more accountable than Dems up until now based on the fact that they were holding all the cards. Time will tell if the Democrats can remedy the problems, but after this administration and the mess we are currently they sure as hell have their work cut out for them. Nader was so very close to getting the majority needed to advocate federal funding for a 3rd party in this country in 2000, unfortunately those votes cost Gore the election and gave us Bush...... /sigh
December 19, 2008 at 1:42 p.m. ( permalink | suggest removal )
seriouslyfolks (anonymous) says...
goodoleboy
It's good to hear you're an independent. You sure sound a lot like a Democrat to me but it's good to know your not. Gore would have been no better. Bush may have over reacted to 9/11 but Gore would have had no clue as to what to do and there would have surely been more attacks on our soil(and not the kind of attacks on soil that Gore likes to talk about;)).
Anyway back on topic, I agree with madpoet it's time for everyone to tighten their belts. I hope the government does the same.
December 19, 2008 at 2:49 p.m. ( permalink | suggest removal )
goodoleboy (anonymous) says...
Democrat no, centrist yes. It's unknown how Gore would have done, but at the time it was unknown how Bush would do either, but looking back in retrospect I can say with degree of certainty that Bush has been a failure as a president and I think Gore would have done a better job. I mean come on man, its not like its hard to top Bush hehe, I did vote for Nader in that one because I wanted federal funding of a 3rd party /sigh. Its all speculation about the attacks on soil thing, it can happen under any administration and at any time, there are simply too many routes and ways to attack and we cannot stop them all.
I think the reason I sound Democrat at the moment is my complete disdain for the republican "brandname". Conservative, smaller government, etc. The last 8 years they have gone completely opposite of what they stand for, which is why I am so critical of them. They need to rebrand themselves and stick to it.
December 19, 2008 at 3:29 p.m. ( permalink | suggest removal )
seriouslyfolks (anonymous) says...
goodoleboy
I feel bad as it seems we have high jacked this thread but I'm enjoying our conversation.
Your statement about the Republicans going completely opposite of their ideals is 110% true. Man that's why I'm so angry with them because I do believe in those ideals but for the ideals to work you actually have to do them. As we both are all to aware of they have not. Unfortuneatly people associate conservatism(if that's a word.....I'm sure Bush would say it is anyway) with the Republican party and jump to the conclusion that conservatismness;) doesn't work. It's great to know that some people, like yourself, can seperate the two. I think it's just easier for most people to lump the two together and dismiss both.
Again, I've enjoyed our conversation but we better let it get back on track.
Talk to ya latter
December 19, 2008 at 5:31 p.m. ( permalink | suggest removal )
Free4all (anonymous) says...
Just isn't any fun when no one is throwing some blows out there. Guess all the Bush backer repub. and "hard core dems" dont want to stick their necks out. The cut throating going on with both sides right now is just outrageous when this country is hurting. The Democratic and Republican parties are starting to resemble the car makers. Old dinosaurs who need to be sent out to pasteur.
December 19, 2008 at 5:42 p.m. ( permalink | suggest removal )
truelovecharlie (anonymous) says...
One thing is for sure; Bush could easily be a "lame duck" and ignore this situation. With the bashing he has taken for the last 8 years, I wouldn't blame him if he decided to just pass the buck. I commend him for attempting to present a stop-gap messure that will sustain the big 3 until the new administration takes over. As I've said before; if the american auto workers would take pride in their work and produce a quality product at a reasonable price, they might not have found themselves where they are now. They are way over-compensated.
December 19, 2008 at 6:27 p.m. ( permalink | suggest removal )
goodoleboy (anonymous) says...
Benefit wise, yes they are, wage wise, no they comparable with the imports. These 70-80$ figures you see floating around are with the dollar value of the benefit packages factored in. Currently %10 of the cost of the car is attributed to labor with the Big 3. business plans and business models are management decisions, and while the unions are partly to blame in this debacle, the real burden of this falls directly the managements shoulders.
December 19, 2008 at 6:36 p.m. ( permalink | suggest removal )
alfalfa (anonymous) says...
All this is over my head(the entire economic crisis), but, I am glad Bush took $17 or 18 billion(give or take a billion or two, what difference does it really make now?) out of the $700 billion that was to go to the bankers. I think I would rather see an industry bailed out that actually makes something, over an industry that pushes paper and is probably 80 or 90 percent to blame for our rotten economy. I don't really know how viable the big 3 are, but I do know they employ alot of people, and with 2 weeks in a row of half million plus new jobless claims, we really don't need the entire auto industry to collapse right now.
December 19, 2008 at 8 p.m. ( permalink | suggest removal )