U.S., auto execs try to craft bailout
Bush administration officials and auto executives worked Monday to try to seal a deal for a multibillion-dollar industry bailout, amid hopes that the money could be available this week.
“It seems like the planets are becoming aligned,” said Rep. Fred Upton (R-Mich.), co-chairman of the Congressional Auto Caucus, who added that administration officials indicated to him that an announcement was likely by Wednesday.
General Motors Corp. and Chrysler have said they are near bankruptcy, and they have crucial payments due Jan. 2 to many auto part suppliers. With the holidays approaching, the Bush administration and the auto companies would need time even after a deal is completed to process the money, Upton said.
“It has to get done in the next day or two,” he said.
President Bush said his administration was moving quickly.
“This will not be a long process, because of the economic . . . fragility of the autos,” he told reporters late Sunday aboard Air Force One during his trip to Iraq and Afghanistan. The size of an emergency loan package and what strings the government would attach remained unclear Monday as officials reviewed the complex finances of GM and Chrysler.
GM has said it needs $4 billion by the end of the month and an additional $6 billion by March 31 or it could run out of cash. Chrysler has said it needs $4 billion by March 31.
The Bush administration was considering using money from the $700-billion Troubled Asset Relief Program, designed to help the financial services sector, to provide the emergency loans to automakers. House Speaker Nancy Pelosi (D-San Francisco) told reporters Monday that she was optimistic action would come “sooner rather than later.”
“All the signals coming from the White House are that they know that bankruptcy is not an option, and that TARP funds are the only recourse” after a $14-billion auto bailout bill failed in the Senate last week, Pelosi said.
Some media reports said the White House was considering as much as $40 billion in aid to the automakers. But TARP funds are running low, as Congress has voted to release only half the $700 billion so far. With only about $15 billion in the fund now, the White House would have to formally request the second half of the Wall Street bailout fund from Congress or find another funding source, such as Federal Reserve loans, if it wanted to lend carmakers more.
Senior GM officials have been in contact with top Treasury and Bush administration officials about the bailout, GM spokesman Greg Martin said. A Chrysler spokesman would not comment.
GM’s stock price rose 14 cents, or 3.6%, to $4.08 and Ford’s rose 14 cents, or 4.6%, to $3.18 following declines Friday after the White House-backed bailout bill died. Chrysler is privately held. Ford does not need short-term loans but it has said a failure by one of its domestic rivals would endanger it, as well, because of their many shared suppliers.
Opposition among conservative Republicans to an auto industry bailout remains strong.
Mark Sanford, the Republican governor of South Carolina, took the unusual step of publicly criticizing the White House for considering using the Wall Street bailout fund for automakers.
“I believe this would be a very grave mistake,” Sanford said. “It would open the floodgates to federal monies for every distressed industry across the country -- and there will be many in this economic slowdown,” Sanford wrote to Bush on Monday.
Like many Southern opponents of a Detroit bailout, Sanford is from a state that is home to a foreign automaker factory, in his case a BMW plant that employs 5,400.
A study released in September by the Moore School of Business at the University of South Carolina said that BMW contributed nearly $2 billion to the state’s economy and supported nearly 24,000 jobs statewide. South Carolina does not have any GM, Chrysler or Ford factories.
Lawmakers such as Upton and Sen. Carl Levin (D-Mich.) from states with Big Three plants continued to push for the government aid Monday, and they renewed their warnings that hundreds of thousands of jobs could be lost if the companies failed.
“I think they understand the urgency,” Levin said of the Bush administration.
Vice President Dick Cheney acknowledged the stakes Monday.
“We’re on the downside of a recession that may be the worst since World War II,” he told radio host Rush Limbaugh. “And if the automobile industry goes belly up now, there’s a deep concern that that would be a major shock to the system.”
Times staff writer Ken Bensinger contributed to this report.