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Automakers May Get White House Reprieve

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Automakers May Get White House Reprieve


Automakers May Get White House Reprieve

Automakers May Get White House Reprieve

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The White House has said it is ready to step in to a prevent the collapse of General Motors and Chrysler. But such a last-minute rescue is no more than a reprieve and questions about a more extensive bailout will be waiting for president-elect Barack Obama and the new Congress.


From NPR News, this is All Things Considered. I'm Robert Siegel.


And I'm Michele Norris. It looks like the struggling auto companies will get some help, but not from Congress. The White House changed course today and said it was not about to let a big chunk of the U.S. auto industry fall into bankruptcy. And so the Bush administration may after all provide funds from the TARP, that's the billions of dollars originally set aside for banks and other financial companies.

SIEGEL: That turnabout came after a deal fell apart last night in the Senate. In a moment, we'll hear what some auto workers have to say about that. First, this new offer of financial aid is a reprieve, a short-term fix. The companies still face big problems, and as NPR's Frank Langfitt reports, it will be up to President-elect Barack Obama and a new Congress to solve those problems.

FRANK LANGFITT: Last night, the outlook for GM and Chrysler was bleak. The bridge loan had crashed in the Senate. But this morning, a reluctant White House said it was ready to lend the companies money to stay alive. White House Press Secretary Dana Perino said, quote, "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." And the Treasury Department said it was, quote, "ready to prevent imminent failure." Democrats who've been pushing for a bailout were pleased by the news. This is Senator Christopher Dodd from Connecticut.

Senator CHRISTOPHER DODD (Democrat, Connecticut): So, I'm encouraged this Friday afternoon that at some point today or over the weekend the White House will announce a course of action that will avoid the kind of catastrophe that all of us are worried about.

LANGFITT: In Detroit, United Auto Worker President Ron Gettelfinger breathed a sigh of relief.

Mr. RON GETTELFINGER (President, United Auto Workers of America): I think it's great news, the response that we've been getting out of both the White House and out of Treasury.

LANGFITT: Gettelfinger had spent the night before battling Senate Republicans over proposed wage cuts. Gettelfinger had refused. Now, his members look to have another chance.

Mr. GETTELFINGER: So, we're prepared to move forward. That still means there's a lot of work to be done here.

LANGFITT: He's right. The White House says it's willing to help, but it hasn't formally announced a bailout or any details. Earlier this afternoon, a GM official told me, quote, "we're very encouraged." But he also said the company was still in discussions with the White House on terms. The most likely source of money would be the Treasury Department's Wall Street bailout fund. There's about $15 billion left. For many in the auto industry, the last 24 hours have been a wild ride. Neil De Koker described it like this.

Mr. NEIL DE KOKER (President and CEO, Original Equipment Suppliers Association): Yesterday, last night, was very disappointing. I ran out of vodka last night, that's how bad it was.

LANGFITT: De Koker heads the Original Equipment Suppliers, it's the largest auto supplier trade group in the country. He says Chrysler and GM owe auto suppliers more than $8 billion right now. Without federal help, he says the company's would have gone under and taken many suppliers with them. De Koker says federal money will buy time, but not much else. He thinks demand for parts this month and next could plunge to levels not seen in three to five decades. And he said suppliers continue to press Chrysler to make sure the company can keep paying.

Mr. DE KOKER: And I think there's a meeting this afternoon to show suppliers that, financially, they are in good shape. And a few months ago, that was much better than today. Today, I think, it's basically, you know, hey, guys work with us. We're working with the government. We should get through this.

Ms. ANNETTE SYKORA (Chairwoman, National Auto Dealers Association): I never lost all hope.

LANGFITT: Annette Sykora chairs the National Auto Dealers Association. She says without a bailout for Detroit, hundreds of dealers would have gone under in the coming weeks.

Ms. SYKORA: I can picture this catastrophe and think it would have meant a very bleak Christmas for all of our employees.

LANGFITT: But many dealers face a tough future no matter what. More than 700 have already gone out of business this year. And GM and Chrysler are promising to cut more in 2009 in exchange for federal funds. Sykora says the recession will kill off others.

Ms. SYKORA: We may leave another 900 still in the coming year. But that's still much less than if the story had been different this morning.

LANGFITT: Even as many in the auto industry exhaled, critics were skeptical about Detroit's future. Senator Bob Corker, the Tennessee Republican, said that bailout or not, Chrysler would never make it as a stand-alone company. Most people who follow the business agree. Frank Langfitt, NPR News, Washington.

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Bush May Tap Wall St. Bailout Fund For Automakers

NPR's David Welna reports on the auto bailout, on 'Morning Edition'

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The White House said Friday it is considering tapping into the Wall Street rescue fund to extend emergency loans to Detroit automakers after Senate Republicans scuttled an alternate bailout plan for the Big Three. Amid the worst sales slump in decades, General Motors announced it will cut production by 250,000 vehicles in the first quarter of 2009.

The president's press secretary, Dana Perino, said it would be "irresponsible" to further weaken the economy by letting the car manufacturers fail.

The Treasury Department, meanwhile, said it was standing by to act on behalf of the automakers.

"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," said Treasury spokeswoman Brookly McLaughlin.

Although the White House had earlier resisted using any of the $700 billion financial industry bailout to help the automakers, Perino said that given the economy's shape, President Bush is considering the option.

The $14 billion bill lost a 52-35 procedural vote late Thursday, with at least 60 votes needed to avoid a filibuster. The defeat prompted lawmakers in both parties to call on the White House to approve such a move to help General Motors Corp. and Chrysler LLC, which have said they could run out of cash within weeks.

"Plan B is the president," Sen. Carl Levin (D-MI) said after the vote failed.

Democrats pushed the auto industry aid measure through the House on Wednesday, but it became clear quickly that the lifeline faced an uphill battle in the Senate.

Earlier, the White House said it is disappointed by the Senate's vote and that the legislation "presented the best chance to avoid a disorderly bankruptcy."

President-elect Barack Obama on Thursday echoed concerns over the fate of the automakers, saying an industry shutdown would have a "devastating ripple effect" on the already battered economy.

GM and Chrysler say they are in immediate danger of collapse, while Ford Motor Co. says it doesn't need help yet, but could need it later.

Republicans have blamed the United Auto Workers' unwillingness to make substantial concessions as one reason the deal collapsed.

UAW President Ron Gettelfinger hit back at a news conference in Detroit on Friday, saying the union had done what it could.

"We've already stepped forward and made enormous concessions," Gettelfinger said.

"We made it clear last night we were prepared to make further sacrifices, but we could not accept the effort by the Senate GOP caucus to single out workers and retirees for different treatment and to make them shoulder the entire burden of any restructuring," he said.

"If we work for nothing, it wouldn't help them (GM) limp into January," he said.

Gettelfinger said he's confident that a solution will emerge despite the Senate vote.

GM announced Friday that it will cut its first-quarter 2009 production schedule by 250,000 vehicles, slashing its output to about a half-million units. The cut will allow the automaker to temporarily shut down assembly lines in 21 factories in the U.S., Canada and Mexico. Spokesman Tony Sapienza said normal production would be around 750,000 cars and trucks for the quarter.

Detroit's Big Three employ nearly 250,000 workers, with more than 730,000 others producing materials and parts for cars.

Many congressional Republicans have said that Chapter 11 bankruptcy is the best option for the carmakers to restructure. They fear that intrusive government oversight would hamstring the manufacturers and leave taxpayers on the hook for even larger loans down the road.

The Big Three have rejected the bankruptcy option.

GM said it is "deeply disappointed" that the plan failed, adding that it will continue in efforts to "obtain the means to weather the current economic crisis." Chrysler also said it is disappointed and will "continue to pursue a workable solution to help ensure the future viability of the company."

World stock markets plunged Friday on news that the bailout failed to pass the Senate, with Japan's Nikkei closing down 5.6 percent, and the FTSE 100 Index of leading British shares trading substantially lower. But the Dow Jones industrial average closed up 64 points to 8629 on optimism that the Bush administration would assist the carmakers if Congress didn't.

From NPR staff and wire reports