DETROIT (AdAge.com) -- Declaring that an auto-industry collapse would "deal an unacceptably painful blow to hardworking Americans far beyond the auto industry," President Bush this morning announced a rescue plan for automakers. The president said the federal government will dip into the Troubled Assets Relief Program to grant Detroit's three car makers an immediate $13.4 billion in loans.
At a press conference, the president said "meaningful concessions" would have to come from many parties, including labor, dealers and bond holders. The government will make an additional $4 billion available to the car makers in a couple of months if they develop viable plans for survival. The plan is similar to one approved by the House but rejected by the Senate.
'Much work in front of us'
If the car companies don't come up with viable plans by March 31, they will be required to pay back the loans. Mr. Bush said, "The financial crisis brought the auto companies to the brink of bankruptcy much faster than they could have anticipated. And they have not made the legal and financial preparations necessary to carry out an orderly bankruptcy proceeding that could lead to a successful restructuring." He said it was "too great a risk" not to help the domestic automakers, which, if they landed in bankruptcy, "could send our economy into a deeper and longer recession." He added, "Letting them collapse is not a responsible course of action."
Ford Motor Co. has said it doesn't need a federal bridge loan, but General Motors Corp. and Chrysler wasted no time issuing statements thanking the administration. GM said: "We know we have much work in front of us to accomplish our plan. It is our intention to continue to be transparent as we execute our plan, and we will provide regular updates on our progress."
No car czar
Chrysler Chairman-CEO Bob Nardelli said the automaker "would remain focused on its challenge, and this initial injection of working capital would help bridge the liquidity crisis the industry is facing and assist in helping return Chrysler to profitability."
Now the automakers must make the tough moves to meet the requirements of the funding. GM CEO Rick Wagoner told Congress earlier this month the automaker would focus on just four of its eight vehicle brands as part of its restructuring plan.
The Bush plan at least for the moment abandons the creation of an auto czar. Instead, during the Bush administration, Treasury Secretary Henry Paulson will be in charge of overseeing the rescue. Joel Kaplan, deputy White House chief of staff for policy, said that with the coming change in administrations it didn't seem logical to create a separate post.~ ~ ~
Contributing: Ira Teinowitz