Bush unveils $17.4bn car bail-out


Richard Moore


Bush unveils $17.4bn car bail-out

The US government has said it will provide $17.4bn (£11.6bn) in loans to help troubled carmakers General Motors and Chrysler survive.

President George W Bush said allowing the US car industry to fail would not be “a responsible course of action”.

Ford has said it hopes to get by without government help.

The government will use part of the $700bn originally pledged to rescue US banks. It has set a deadline of 31 March for the firms to become viable.

General Motors will get $9.4bn and Chrysler $4bn before the end of the year. A further $4bn will be provided later.

GM Chief Executive Rick Wagoner said his company would focus on “fully and rapidly implementing the restructuring plan that we reviewed with Congress earlier this month”.

“It’s really the blueprint for a new General Motors, one for our second 100 years,” he said.

US President-elect Barack Obama urged the carmakers not to “squander this chance to reform bad management practices” in the industry.

“The auto companies must bring all their stakeholders together, including labour, dealers, creditors and suppliers, to make the hard choices necessary to achieve long-term viability.”

Extraordinary times

Mr Bush’s unveiling of the rescue package was a candid announcement from a grim-faced president, says the BBC’s Justin Webb, in Washington.

Mr Bush has made it clear he believes the free market should normally be allowed to take its course, but he has listened as well to the voices telling him that this could be catastrophe, our correspondent says.

The car makers have argued that even an orderly bankruptcy would send them out of business forever, with the loss of millions of American jobs.

“Under ordinary economic circumstances, I would say this is the price that failed companies must pay,” Mr Bush said.

“But these are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the US auto industry to collapse is not a responsible course of action.”

Carmakers would have to make hard decisions to reform the industry, he said, with restructuring requiring “meaningful concessions from all involved in the auto industry”.

The package announced by Mr Bush does not need Congressional approval, as it is part of the existing $700bn financial bail-out programme.

An attempt to secure a $14bn (£9.4bn) rescue fund for the carmakers was rejected by the US Senate last week.

‘Critical situation’

Car dealers, some of whom have been waiting for payments from the manufacturers, welcomed the bail-out.

“The question now is how to excite consumers to buy cars from January to March. We’re all sitting on millions of dollars of unmoving cars,” said Raymond Ciccolo, a GM dealer in Boston.

All car firms have announced production cuts as the economic slowdown has slashed car sales.

Detroit’s Big Three carmakers, Chrysler, Ford and GM, have repeatedly warned that millions of jobs could be lost if the government does not agree to a package of loans to support the industry.

“These loans were desperately needed before the end of December, because the situation for the automakers is so critical,” said Dennis Virag at Automotive Consulting Group.

Meanwhile, US Treasury Secretary Henry Paulson urged Congress to authorise the use of the second half of the $700bn Wall Street bail-out, as the first $350bn had already been committed.

Story from BBC NEWS: