White House to intervene in auto bailout stalemate

(AP) - With Congress gridlocked and the economyflailing, the Bush administration declared Friday it would step inand prevent the "precipitous collapse" of the U.S. auto industryand the disastrous economic

News 12 Staff

Dec 13, 2008, 1:22 AM

Updated 5,692 days ago

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(AP) - With Congress gridlocked and the economyflailing, the Bush administration declared Friday it would step inand prevent the "precipitous collapse" of the U.S. auto industryand the disastrous economic impact of the hundreds of thousands ofjob losses sure to follow.
The day after the sudden demise of emergency legislation inCongress, administration officials said no decisions had been madeon the size or duration of the new rescue plan, or what type ofconcessions, if any, would be demanded from the strugglingautomakers, their workers, stockholders or others.
In a reversal, the most likely option under considerationinvolved billions of dollars originally ticketed for the bailout ofthe financial industry. President George W. Bush had long declaredthat money off-limits to the beleaguered automakers.
General Motors Corp. and Chrysler LLC have warned they arerunning out of cash and face bankruptcy without some form ofassistance. Ford Motor Co., which is in somewhat better shapefinancially, has been seeking access to a line of credit.
Urgent requests for White House intervention to save theautomakers came from President-elect Barack Obama, Republican andDemocratic members of Congress and outside groups.
"Under normal economic conditions we would prefer that marketsdetermine the ultimate fate of private firms," White House presssecretary Dana Perino said after the failure of a $14 billionbailout bill in Congress. The legislation died when SenateRepublicans demanded upfront pay and benefit concessions from theUnited Auto Workers that union officials rejected.
Perino added, "Given the current weakened state of the U.S.economy, we will consider other options if necessary including useof the TARP program to prevent a collapse of troubled automakers. Aprecipitous collapse of this industry would have a severe impact onour economy, and it would be irresponsible to further weaken anddestabilize our economy at this time."
TARP is the $700 billion Troubled Assets Recovery Program, thefinancial industry bailout plan enacted in October. All but $15billion of the first $350 billion has been dedicated to troubledbanks or insurance companies, and the Treasury Department is barredfrom dipping into the second $350 billion without a formalnotification of Congress.
No decision has been reached about such a notification,administration officials said. If one is made, Congress could thenvote to prevent the action, but it would be unlikely to prevail ina showdown with the president.
Obama, who will inherit the problem next month, even if bailoutbillions are handed over in the meantime, said, "My hope is thatthe administration and the Congress will still find a way to givethe industry the temporary assistance it needs while demanding thelong-term restructuring that is absolutely required."
In a letter to Bush, House Speaker Nancy Pelosi urged thepresident to demand "the same tough accountability" and taxpayerprotections from the automakers as was contained in legislationthat cleared the House at midweek.
Michigan Rep. Thaddeus McCotter, a conservative Republican froma state where Ford, GM and Chrysler are headquartered, said, "Withthe legislative opportunities now exhausted, I urge the presidentof the United States to immediately release Wall Street TARP fundsto the domestic automakers to avoid their impending bankruptcy andits consequent devastation of working families and the depressionof our American economy."
It was unclear what role was left to lawmakers after anextraordinary week in which prospects for industry relief seemed tochange by the hour.
A week ago, the government reported the loss of 533,000 jobs inNovember, the worst monthly showing in more than 30 years.
In the days between then and now, the White House andcongressional Democrats agreed on a $14 billion measure that wouldhave extended short-term financing to the industry whileestablishing a powerful new "car czar" to make sure the money wasused to turn the Big Three into competitive companies. That billpassed the House on Wednesday but immediately ran into oppositionfrom Senate Republicans who said it did not go far enough.
On Thursday, they demanded the United Auto Workers union agreeto accept a lower pay and benefits package that would be in linewith compensation earned by workers at U.S. factories producingcars for Japanese companies such as Honda, Toyota and Nissan. In anunprecedented series of negotiations, lawmakers met withrepresentatives of industry and labor on the first floor of theCapitol in hopes of striking a deal - the effort that ultimatelycollapsed when the UAW balked at the terms demanded.
At a news conference on Friday, UAW President Ron Gettelfingeraccused GOP senators who blocked emergency loans of trying to"pierce the heart" of organized labor.
Sen. Bob Corker, R-Tenn., who played a leading role forRepublicans, told reporters at the Capitol that the talks cameclose to success but failed when the UAW refused to commit tolowering its pay-and-benefits package in 2009 so it would be "atparity" with the Japanese companies.
He also laid blame at the feet of the administration. "I thinkit being known that the White House at the end of the day wouldprobably blink probably helped keep us from a deal," he said.
Whatever the reason, the effort stalled when Republicans voteden masse against advancing the original House bill to a final votelate Thursday night.
To see UAW President Gettelfinger's comments on the stalemate, go to Channel 612 on your iO digital cable box and select iO Extra.


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