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U.S. scrambles for new auto aid source

WASHINGTON — With Congress gridlocked, the Bush administration declared Friday it would step in to prevent the "precipitous collapse" of the U.S. auto industry and the disastrous loss of hundreds of thousands of jobs sure to follow.

A day after the demise of rescue legislation in Congress, carmakers were talking with the administration and the Federal Reserve about how they could still get the billions of dollars they say they need to survive. The talks included conditions that automakers would have to meet, said GM spokesman Greg Martin.

"We need these loans, and we're not particularly fussy about how we get the loans or where they come from," said GM board member George Fisher.

The administration said no decisions had been made on the size or duration of the new bailout plan, or what type of concessions might be demanded from the struggling automakers, their workers, stockholders or others.

In a reversal, the most likely rescue option under consideration involved billions of dollars originally ticketed for the bailout of the financial industry. President Bush had earlier declared that money off-limits to the automakers.

Many lawmakers and analysts fear that tapping the Treasury's Troubled Asset Relief Program to rescue the auto companies could open the way for other aid requests from ailing companies outside the financial sector.

General Motors Corp. and Chrysler LLC have warned they are running out of cash and face bankruptcy without some form of assistance. Ford Motor Co., which is in somewhat better shape financially, has been seeking access to a line of credit.

Underlining its difficulties, GM announced Friday 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 move affects most plants in the United States, Canada and Mexico. Many will be shut the entire month of January.

The automakers' suppliers said they were already suffering from the industry slowdown.

"Our warehouse used to be full of huge coils of steel waiting to be processed," said Wes Smith, president of E&E Manufacturing, an auto supplier in Michigan. "Now it's empty. We have no orders. No one is buying vehicles right now."

The big auto companies, analysts said, are due to pay most suppliers Jan. 2 — before Congress returns. Some suppliers said unpaid bills were already piling up.

Meanwhile, GMAC, which provides financing for most GM dealers and many GM customers, remains locked in negotiations with its investors over a restructuring plan.

GMAC set a deadline of 5 p.m. Friday to persuade investors to participate in its plan to become a bank holding company, allowing it to access money from sources including the Treasury Department. Analysts said the company could be forced to file for bankruptcy protection if it does not succeed.

The deadline passed without immediate comment from the investors or the company.

Urgent requests for White House intervention to save the automakers came from President-elect Obama, Republican and Democratic members of Congress and outside groups.

The legislation died when Senate Republicans demanded upfront pay and benefit concessions from the United Auto Workers that union officials rejected.

Obama, who will inherit the problem next month, even if bailout billions are handed over in the meantime, said, "I share the frustration of so many about the decades of mismanagement in this industry that has helped deliver the current crisis. … But I also know that millions of American jobs rely directly or indirectly on a viable auto industry."

the senator vs. the union chief

The United Automobile Workers union has a new adversary: Sen. Bob Corker, a freshman Republican senator from Tennessee. Corker pushed the UAW's president, Ron Gettelfinger, Thursday night to accept tough contract concessions before the Senate Republicans would agree to provide a lifeline to General Motors and Chrysler. Gettelfinger, after giving ground in recent years on health care, job security and pay issues, would not agree to let the concessions take effect next year. The impasse effectively killed the chances for a $15-billion bailout from Congress. But while the deal was lost, both Gettelfinger and Corker are emerging from the crisis with their reputations strengthened, perhaps setting the stage for future showdowns.

On Gettelfinger's side: UAW members applauded his refusal to budge further, even if it put the American auto industry at risk. "He stood up and did what he had to do," said Dean Braid, a 30-year veteran at a GM plant in Flint, Mich.

What's next for Corker: With his sharp and colorful criticism, Corker has become the new face of the opposition to the bailout effort, after Sen. Richard Shelby, R-Ala., led the way by calling Detroit's Big Three "dinosaurs." Now it's Corker who is being invited to appear on Sunday morning talk shows.

U.S. scrambles for new auto aid source 12/12/08 [Last modified: Thursday, November 4, 2010 11:57am]
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