Big Three to get $17.4 billion in emergency loansPosted: Updated:
(AP)- Citing danger to the national economy, theBush administration came to the rescue of the U.S. auto industryFriday, offering $17.4 billion in emergency loans in exchange forconcessions from the deeply troubled carmakers and their workers. At the same time, Treasury Secretary Henry Paulson said Congressshould authorize the use of the second $350 billion from thefinancial rescue fund that it approved in October to rescue hugefinancial institutions. President Bush said, "Allowing the auto companies to collapseis not a responsible course of action." Bankruptcy, he said, woulddeal "an unacceptably painful blow to hardworking Americans"across the economy. One official said $13.4 billion of the money would be availablethis month and next, $9.4 billion for General Motors Corp. and $4billion for Chrysler LLC. Both companies have said they soon mightbe unable to pay their bills without federal help. Ford Motor Co.has said it does not need immediate help. Bush said the rescue package demanded concessions similar tothose outlined in a bailout plan that was approved by the House butrejected by the Senate a week ago. It would give the automakersthree months to come up with restructuring plans to become viablecompanies. If they fail to produce a plan by March 31, the automakers willbe required to repay the loans, which they would find verydifficult. "The time to make hard decisions to become viable is now, orthe only option will be bankruptcy," Bush said. "The automakersand unions must understand what is at stake and make hard decisionsnecessary to reform." Bush's plan is designed to keep the auto industry running in theshort term, passing the longer-range problem on to the incomingadministration of President-elect Barack Obama. The White House package is the lifeline desperately sought byU.S. automakers, who warned they were running out of money as theeconomy fell deeper into recession, car loans became scarce andconsumers stopped shopping for cars. The carmakers have announced extended holiday shutdowns.Chrysler is closing all 30 of its North American manufacturingplants for four weeks because of slumping sales; Ford will shut 10North American assembly plants for an extra week in January, andGeneral Motors will temporarily close 20 factories - many for theentire month of January - to cut vehicle production. Bush said the auto manufactures have faced serious challengesfor many years: burdensome costs, a shrinking share of the marketand plunging profits. "In recent months, the global financialcrisis has made these challenges even more severe," he said. The president said that on the one hand, the government has aresponsibility not to undermine the private enterprise system, yeton the other hand, it must safeguard the broader health andstability of the U.S. economy. "If we were to allow the free market to take its course now, itwould almost certainly lead to disorderly bankruptcy andliquidation for the automakers," he said. "Under ordinary economic circumstances, I would say this is theprice that failed companies must pay," the president said. "And Iwould not favor intervening to prevent the automakers from goingout of business. But these are not ordinary circumstances. "In the midst of a financial crisis and a recession, allowingthe U.S. auto industry to collapse is not a responsible course ofaction." Chrysler CEO Bob Nardelli thanked the administration for itshelp. In a statement Friday morning, Nardelli said the initialinjection of capital will help the company get through its cashcrisis and help eventually return to profitability. He saidChrysler was committed to meeting the conditions set by Bush inexchange for the money.
Click here to watch President Bush announce details of the bailout