More aid sought for automakers
Democratic leaders in Congress asked the Bush administration on Saturday to provide more aid to the struggling auto industry, which is bleeding cash and jobs.
House Speaker Nancy Pelosi (D-San Francisco) and Senate Majority Leader Harry Reid (D-Nev.) said in a letter to Treasury Secretary Henry M. Paulson that the administration should consider expanding the $700-billion bailout to include car companies.
“A healthy automobile manufacturing sector is essential to the restoration of financial market stability, the overall health of our economy, and the livelihood of the automobile sector’s work force,” they wrote. “The economic downturn and the crisis in our financial markets further imperiled our domestic automobile industry and its work force.”
The administration did not comment directly on the request to broaden the $700-billion financial industry bailout so automakers could get a share. Treasury spokeswoman Brookly McLaughlin said the department was working on ways to most effectively use the remaining dollars in the rescue to strengthen the financial system and get lending moving again.
Automakers already want an additional $50 billion in loans from Congress to help them survive tough economic conditions and pay for healthcare obligations for retirees. The companies are seeking the loans as part of an economic aid plan that is now more likely to come together early next year rather than in a postelection session of Congress this month.
Top executives of General Motors Corp., Ford Motor Co. and Chrysler and the president of the United Auto Workers met with congressional leaders Thursday to discuss the loans. The money would be on top of the $25 billion in loans that Congress passed in September to help retool auto plants to build more fuel-efficient vehicles.
“We left the meetings convinced that our nation’s automobile industry -- the heart of our manufacturing sector -- and the jobs of tens of thousands of American workers are at risk,” Pelosi and Reid wrote in their letter to Paulson.
If Congress approved more loans to automakers, it would come with strings attached. Potential protections include limits on executive compensation, awarding the government preferred stock in the companies, and a suspension of dividend payments to investors.
GM, the nation’s largest automaker, warned Friday that it may run out of money by the end of the year after piling up billions in third-quarter losses and burning through cash at an alarming rate. Ford is in better shape because the company borrowed billions of dollars in 2007 by mortgaging its factories. The company said it had enough cash to make it through 2009.
“We must safeguard the interests of American taxpayers, protect the hundreds of thousands of automobile workers and retirees, stop the erosion of our manufacturing base, and bolster our economy,” Pelosi and Reid wrote.
President-elect Barack Obama said Friday that his transition team would explore policy options to help the auto industry. Obama’s economic transition team includes two allies of the auto industry -- Michigan Gov. Jennifer M. Granholm and former Rep. David E. Bonior (D-Mich.).
Sen. Carl Levin (D-Mich.) said in an interview that he was hopeful the Bush administration would view the $700-billion bailout as flexible enough to include the auto industry. But he said Democrats and Republicans in Michigan’s congressional delegation were writing an amendment to the bailout law that would provide the $25 billion in loans.
“It’s inexcusable that they not see the importance of the auto industry to the economy,” Levin said.
He said relying on the loan program for the development of fuel-efficient vehicles was not a practical way to help the domestic companies deal with their financial troubles. “It’s too slow in the payout,” Levin said.
In a statement, Chrysler said the company would continue to urge Congress and the Bush administration to immediately address the liquidity crisis facing the automotive industry amid the economic downturn and the lack of available financing for dealers and customers.
GM and Ford also issued statements Saturday urging the government to help the auto industry in light of the economic downturn. “A critical portion of the U.S. economy rests on the industry’s shoulders,” GM spokesman Greg Martin said.
