Only President Bush can save GM and Chrysler now UPDATE Under mounting pressure to act, the Bush administration said Friday it was ready to step in and prevent the U.S. auto industry from collapsing after the Senate refused to pass a rescue bill endorsed by the White House and congressional Democrats. The most obvious source of help was the Wall Street bailout fund.
"The current weakened state of the economy is such that it could not withstand a body blow like a disorderly bankruptcy in the auto industry," White House press secretary Dana Perino said.
|Already reeling from a failed economy and low popularity ratings, President George W. Bush isn't about to have a failed auto industry, just before he leaves office, further tarnish his legacy|
Treasury spokeswoman Brookly McLaughlin said, "Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry."
The Wall Street bailout fund was one of the few remaining options for General Motors Corp. and Chrysler LLC, which have said they could run out of cash within weeks. President George W. Bush had originally refused to use the bailout fund to help the automakers, insisting that help come from Congress. But the White House said it must reconsider after the Senate failed to agree on a $14 billion rescue plan.
"Congress spoke last night. They don't have the votes to do anything," Perino told reporters on Air Force One as Bush traveled to a commencement speech in Texas. "They didn't get it over the goal line and so we have to consider what other options we would take." She declined to say when a decision would be made.
President-elect Barack Obama said he was disappointed that the Senate failed to act. "My hope is that the administration and the Congress will still find a way to give the industry the temporary assistance it needs while demanding the long-term-restructuring that is absolutely required," he said in a statement.
About $15 billion from the first half of the $700 billion financial bailout remains uncommitted. Treasury in the past two months has pumped out about $335 billion to banks and insurance companies. To begin tapping the second half of the bailout, the administration would first have to notify Congress, which could block it or put new conditions on how the money is used. 12/12/08 Last-minute talks in Congress to save General Motors Corp. and Chrysler LLC from collapse fell apart late Thursday after Senate Republicans rejected a compromise $14 billion auto bailout deal.
Senate Majority Leader Harry Reid, D-Nev., called it "a loss for the country."
"I dread looking at Wall Street tomorrow," Reid said Thursday after the talks collapsed. "It's not going to be a pleasant sight. This is going to be a very bad Christmas for many people."
With GM and Chrysler in danger of collapse within weeks, their only chance for survival may be the Bush administration, which could tap the remains of the $700 billion Wall Street bailout package, something the White House has previously rejected. About $15 billion remains in the first $350 billion in the fund. Auto lobbyists said Thursday night that the Bush administration may seek to link funding for automakers to winning approval from Congress to spend the second $350 billion.
"The time has come for the president to use those funds to keep the auto industry alive," Sen. Kit Bond, R-Missouri, said.
White House spokesman Tony Fratto said President George W. Bush was considering his options.
"It's disappointing that Congress failed to act," he said. "We think the legislation we negotiated provided an opportunity to use funds already appropriated for automakers, and presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds only go to firms whose stakeholders were prepared to make difficult decisions to become viable. We will evaluate our options in light of the breakdown in Congress."
"We do know they are on the edge," Sen. Carl Levin, D-Detroit, said of the automakers. "Plan B is the president."
Sen. Debbie Stabenow, D-Lansing, called the defeat "surreal."
"There are those who think they can play games with this," said Stabenow, who wiped away tears. "President Bush please use the authority you have to make sure we do not add another 2.5 million people to the unemployment rolls."
The key issue in the end was the role of the United Auto Workers, and whether the union would accept concessions demanded by Senate Republicans, including agreeing to wage parity with workers of foreign automakers in the United States by 2009. The UAW agreed to do it, but without a specific date.
"You can't make an honest economic argument that you're demanding parity in pay. What, Toyota's going to decide what the wages and benefits are?" Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, said in an interview. Dodd said the UAW agreed that parity would eventually take place. "This was an anti-labor move."
Automakers expressed deep disappointment. Chrysler spokeswoman Lori McTavish said the company "will continue to pursue a workable solution." GM said, "We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis."
The companies could still seek aid from the Federal Reserve, but the central bank has suggested the companies aren't eligible.
GM has hired a bankruptcy law firm as an adviser, a person familiar with the decision said. Detroit News