Struggling US carmakers weighed their options yesterday after the White House said it could tap a US$700 billion rescue package to save them from immediate collapse.
Democrats and a major labor union hailed the policy reversal, after Senate Republicans voted down a US$14 billion rescue package, but automakers expressed concern amid warnings that they were quickly running out of cash.
“Given the current weakened state of the US economy, we will consider other options if necessary — including use of the TARP program — to prevent a collapse of troubled automakers,” White House press secretary Dana Perino said, referring to the Troubled Asset Relief Program conceived to help financial services firms.
And the US Treasury Department “will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry,” said Treasury spokeswoman Brookly McLaughlin.
Lawmakers are due back on Jan. 6.
Perino, speaking aboard US President George W. Bush’s official Air Force One jet, declined to say when a decision would come but said the White House understood “the urgency of the situation.”
The “weakened state of the economy is such that it could not withstand a body blow like a disorderly bankruptcy in the auto industry,” which would “devastate further an already weakened economy,” she told reporters.
The New York Times reported yesterday that the Bush administration had not yet decided how much to loan the auto companies or on what terms. Government officials did not rule out the prospect of a bankruptcy for one or more of the companies, but vowed that it would not be “uncontrolled,” meaning that enough financing would be provided to enable a reorganization, the paper said.
United Automobile Workers union president Ron Gettelfinger welcomed the White House and Treasury announcements as “great news” but worried about the details and pleaded for the funds to come “as quickly as possible.”
Gettelfinger, who has access to the financial records of the Big Three, has said General Motors (GM) will run out of cash before nest year without government help and Chrysler will not be far behind. Struggling Ford says it is in better shape.
Democratic Senate Majority Leader Harry Reid said he was “encouraged” by the Bush administration’s announcements and “appreciative of the administration’s change of heart” on his longstanding push to use TARP funds.
US president-elect Barack Obama, who takes office on Jan. 20, urged the White House and the Congress to “find a way” to provide urgent aid while forcing “the long-term restructuring that is absolutely required.”
Meanwhile, GM announced on Friday that it was idling 30 percent of its North American production “in response to rapidly deteriorating market conditions.”
The company said it would cut another 250,000 vehicles from its first-quarter production schedule, a third of its normal output, by temporarily closing 21 factories across North America.
The US Big Three automakers are also going to shut plants in Canada next month amid falling market demand, the head of the giant Canadian Auto Workers union said on Friday.
Ken Lewenza, the president of the CAW, said that the “majority of our assembly plants are being shut down for inventory adjustments because of the significant decline in sales and because of the global financial crisis.”