Bush: Carmakers Will Get $17.4 Billion In Loans

President Bush announced a rescue package for U.S. automakers Friday morning at the White House. The president said allowing the automakers to collapse would not be responsible.The ailing automakers will get $17.4 billion in loans. Bush said $13.4 billion will come from the $700 billion Wall Street bailout, and another $4 billion will come later.

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STEVE INSKEEP, host:

It's Morning Edition from NPR News. Good Morning. I'm Steve Inskeep. Let's learn more now about President Bush's plans for the auto industry. The president has approved short-term loans for U.S. auto companies. He says as the $17.4 billion in loans will provide, quote, "a brief window" for the auto companies to develop plans for their future. It will help GM and Chrysler at least avoid the bankruptcy that they might otherwise have faced.

(Soundbite of press conference)

President GEORGE W. BUSH: Under ordinary economic circumstances, I would say this is the price that failed companies must pay and I would not favor intervening to prevent the automakers from going out of business. But these are not ordinary circumstances. 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.

INSKEEP: That's President Bush speaking at the White House. Let's go to NPR's Don Gonyea. He covered the auto industry for years before becoming our White House correspondent. Don, good morning.

DON GONYEA: Hi, good morning.

INSKEEP: OK, so, how much money and where does it come from?

GONYEA: Well, looks like it's just over $17 billion, 14 billion of it - which is the number the auto companies had been seeking - that is available right away. There's another three, four billion, in that range, that would be available in February, you know, if needed at that point. And again, it is a loan. The president stressed that over and over, and he said that if these companies cannot prove that they are viable, that they will be able to turn a profit - again, not a lot of specifics there on how they'll show that - but the deadline for that is March 31st. If they can't prove that they're viable, they'd have to pay the money back immediately. The money would come from that TARP program - the Troubled Asset Relief Program - part of the $700-plus billion bailout of the financial sector that was approved not long ago.

INSKEEP: And let's state the obvious here: The companies don't have the money now; they'll be spending the money very quickly. So, if they're told in a few months to pay it back immediately, that would trigger the bankruptcy that's been avoided for now, I would assume.

GONYEA: Ah, exactly. And you know, we heard the White House yesterday, dropping the "bankruptcy" word for the first time. Press Secretary Dana Perino used it; Treasury Secretary Henry Paulson used it. They talked about it being an orderly bankruptcy, as opposed to a disorderly one. But today, the president made it clear that while under normal circumstances he might be happy to let the companies go into Chapter 11 - see if they can figure it out, and if they go under, they go under; so be it - he said these are not ordinary times, and the nation, already undergoing this economic crisis, just couldn't handle that further blow.

INSKEEP: Let's listen to more of the president. He said one reason bankruptcy wouldn't work is there's no way consumers would keep buying cars as these companies tried to reorganize under Chapter 11, and he also said this:

(Soundbite of press conference)

Pres. BUSH: Additionally, the financial crisis brought the auto companies to the brink of bankruptcy faster than they could've anticipated. And they have not make the legal and financial preparations necessary to carry out an orderly bankruptcy proceeding that could lead to a successful restructuring.

INSKEEP: Instead, the loans come through - and again, that's the news - $17.4 billion in short-term loans for the auto industry, but what other conditions here - other than this proving that they can show a profit quickly - are the automakers, the unions, having to give up anything to get this money?

GONYEA: You know, the president's statement was about seven minutes long this morning. He did not lay out off the specifics, except that there are real concessions that need to be made, conditions that need to be met, by all parties. What we're hearing - again, we have not seen the full list yet - is that executive perks will be strictly curtailed. There's also talk about the UAW having to get rid of its jobs bank; that's that bank that pays UAW members who have been laid off. They keep getting their salary, kind of a portion of their straight time salary, even though there's no work...

INSKEEP: Like 95 percent, even.

GONYEA: Exactly. The reason that was set up some 20 years ago was as a disincentive for companies to lay people off. The union thought, well, they won't send the jobs to Mexico or wherever if they have to pay these folks anyway. It didn't really work, and it has become kind of a symbol of, you know, of excess that a lot of critics have pointed to.

INSKEEP: OK, that's NPR White House correspondent Don Gonyea, again, bringing us the news that President Bush has approved $17.4 billion in short-term loans for U.S. automakers, and we'll bring you more as we learn it. Don, thanks very much.

GONYEA: It's my pleasure.

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Bush Sets $17.4 Billion In Loans For Automakers

President Bush announces the administration's plan to help U.S. automakers at the White House. i i

President Bush announces the administration's plan to help U.S. automakers at the White House on Friday. Saul Loeb/AFP/Getty Images hide caption

itoggle caption Saul Loeb/AFP/Getty Images
President Bush announces the administration's plan to help U.S. automakers at the White House.

President Bush announces the administration's plan to help U.S. automakers at the White House on Friday.

Saul Loeb/AFP/Getty Images

In Focus

President Bush on Friday unveiled a long-awaited plan aimed at helping the struggling U.S. auto industry avoid bankruptcy and massive layoffs that could deepen the nation's recession, offering carmakers $17.4 billion in short-term financing.

Speaking at the White House, Bush said General Motors Corp. and Chrysler LLC, both of which have said they are in danger of running out of cash soon, would have immediate access to the money.

"The American people want the auto companies to succeed, and so do I," the president said.

"If we were to allow the free market to take its course now, it would surely lead to bankruptcy and liquidation of the industry," he said.

"Allowing the auto companies to collapse is not a responsible course of action."

Some $13.4 billion — $9.4 billion for GM and $4 billion for Chrysler — would be available through January and would be drawn from the $700 billion fund that was originally earmarked to rescue the financial industry.

But the loans would come with strict conditions. The money could be called back if the automakers cannot prove they are viable by March 31. Executive compensation and other perks would be limited.

"The time to make the hard decisions to become viable is now, or the only option will be bankruptcy," Bush said. "The automakers and unions must understand what is at stake and make hard decisions necessary to reform."

President-elect Obama called the White House plan a "necessary step" to restoring the health of the sector.

The automakers and the United Auto Workers union reiterated Thursday that bankruptcy was not an option. For the UAW, bankruptcy could mean voided labor contracts and renegotiation of benefits.

The White House had been reviewing several options to assist GM and Chrysler, who have sought immediate cash infusions to stay afloat. Ford Motor Co. has said its bottom line is in better shape, but it wants access to government loans if needed in the future.

The automakers said they would do their best to abide by the requirements laid out in the plan.

General Motors said in a statement that the action "helps to preserve many jobs, and supports the continued operation of GM and the many suppliers, dealers and small businesses across the country that depend on us."

"We know we have much work in front of us to accomplish our plan," the company said. "It is our intention to continue to be transparent as we execute our plan, and we will provide regular updates on our progress."

Chrysler Chief Executive Officer Bob Nardelli said his company had signed a "letter of intent" that "outlines the specific requirements that must be achieved."

He said the initial cash injection would assist in helping return Chrysler to profitability.

Ford President and CEO Alan Mulally predicted that the loans would help stabilize the industry even though his company did not immediately need the funds.

"The U.S. auto industry is highly interdependent, and a failure of one of our competitors would have a ripple effect that could jeopardize millions of jobs and further damage the already weakened U.S. economy," Mulally said.

Meanwhile, Treasury Secretary Henry Paulson said Friday that the administration had already allocated the first half of the $700 billion financial industry bailout, and he urged Congress to release the remaining $350 billion.

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