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Automakers get bailout with strings
Question of the Day
President Bush said Friday that he will offer a $17.4 billion government loan to bail out automakers and force them to modernize, but the United Auto Workers union said it will push Democrats in Congress to drop some of the conditions Mr. Bush wants to impose.
Reversing course from his previous opposition, Mr. Bush said the Treasury Department will use the financial package intended to bail out financial firms to help out the car companies, but said the automakers will have until March 31 to prove they can be viable or the loans will be called in.
Mr. Bush said the economy could not withstand the shock from a disorderly bankruptcy. He told The Washington Times in an interview that the companies will now either modernize or have time to prepare for bankruptcy.
“I said, here’s your chance; you can, on the one hand, show you’re viable — we laid out some targets; and on the other hand, if you can’t show you’re viable, at least you’ve got time to prepare for debtor possession financing,” he said.
But the UAW, which represents autoworkers, said Mr. Bush is demanding more concessions from workers than he is from other stakeholders. Union President Ron Gettelfinger said they will ask President-elect Barack Obama and Democrats in Congress to ignore the provisions.
“We will work with the Obama administration and the new Congress to ensure that these unfair conditions are removed,” Mr. Gettelfinger said.
Democratic leaders in Congress said they will examine the deal, but agreed with the unions the terms are skewed against workers.
“The White House proposal unfortunately singles out workers and clearly puts them at a disadvantage before negotiations have even begun,” said House Speaker Nancy Pelosi, California Democrat, though she praised Mr. Bush for taking action.
Many Republicans said the bailout was a bad move, arguing Mr. Bush should have imposed still more conditions on the companies. Sen. Jim DeMint, South Carolina Republican, said Mr. Bush’s action may be unconstitutional because Congress never authorized using the $700 billion Troubled Asset Relief Program, intended for financial institutions, to bail out specific nonfinancial companies.
Senate Republicans last week led a filibuster that blocked a bill to extent about $14 billion to automakers. That bill, a compromise between the administration and congressional Democrats, would have tapped non-TARP funds because Mr. Bush wanted the TARP money to be kept for financial institutions.
With the failure of the bill, though, Mr. Bush said Friday that he had to reverse course and use what money he could.
“These are not ordinary circumstances,” he said. “In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action.”
Mr. Obama was silent on specifics, but said Mr. Bush took “a necessary step” and echoed the president’s declaration that there is a limited window for the companies to act.
“The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely required to save this critical industry and the millions of American jobs that depend on it,” he said.
The loan is split into $13.4 billion initially, and an additional $4 billion to come if the White House requests — and Congress releases — the final half of the TARP money.
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About the Author
Stephen Dinan can be reached at firstname.lastname@example.org.
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