US poised for crucial bail-out
8/12/2008 1:00:00 AM
US Congress has reached an ''agreement in principle'' to lend billions of dollars to struggling US carmakers and with a vote looming in the week ahead lawmakers hope to avert the industry's collapse.The short-term loan package of at least $US15 billion ($A23 billion) could be a lifeline to keep the Big Three carmakers afloat, but is about half what auto chiefs say is needed to stave off bankruptcy.
After locking horns with the White House, Democrats dropped their opposition after the issuing of gloomy official data on Friday showing 533,000 US jobs were lost last month alone.
US lawmakers worked to hammer out details of legislation to bail out ailing car companies that could be presented to Congress as early as today, after reaching an agreement in principle with the Bush Administration.
The legislation is taking shape after House Speaker Nancy Pelosi dropped her opposition to drawing on $A39billion in funds from the Energy Department intended to help car-makers develop more fuel-efficient vehicles, according to a Democratic aide who declined to be identified. ''There is no final deal, but an agreement in principle,'' the source said.
As car chiefs pleaded for an urgent rescue, Mrs Pelosi signalled her approval for a loan from the energy-efficient stimulus fund, but said the ''short-term and limited assistance'' must be swiftly repaid.
''We will not permit any funds to be borrowed from the advanced technology program unless there is a guarantee that those funds will be replenished in a matter of weeks so as not to delay that crucial initiative,'' she said.
Chiefs of General Motors, Chrysler and Ford, which employ millions of US workers, had warned of the industry's imminent demise if Congress and the White House didn't reach a compromise. on the funding.
Democrats had previously called on the White House to tap an already approved $US700 billion ($A1.1billion) finance industry bail-out known as the Troubled Assets Relief Program to rescue the firms.
But President George W.Bush insisted the money should come from diverting already approved funds that were intended to encourage the industry to develop fuel-efficient vehicles.
Media reports said the loan package could be worth $A23 billion to $A26 billion, or about half the bail-out that the Big Three chiefs said was necessary for them to survive.
Congressional aides said the package aimed to sustain automakers through to March, after President-elect Barack Obama will have moved into the White House and the new Congress is in office.
Legislation on the plan was expected to be ''brought up for a vote in the House next week'', Mrs Pelosi said.
The compromise is expected to free up the remaining half of the $US700 billion fund to bail out the financial industry.
Senate majority leader Harry Reid said he hoped his chamber would also vote on a bail-out in a lame-duck session, and pressured Republicans to help push the rescue Bill through.
''We will need support and cooperation from Republicans to determine when that vote happens and whether it will succeed,'' Mr Reid said, adding that the hearings this week ''made clear that we cannot let these companies fail''.
In the hearings before Congress Ford chief executive Alan Mulally made clear the failure of one of the Bit Three companies could result in the demise of its competitors.
''If one of us goes in, it has the potential to take all of us in,'' he said.
Some lawmakers insist the companies should use bankruptcy protection as they restructure, but auto executives maintain the move would prompt consumer confidence in their products to plummet.
In exchange for any assistance, the auto companies will have to submit to strict Government oversight to ensure loans are used effectively.
The bosses appeared at acrimonious hearings two weeks ago but were sent back to Detroit empty-handed and told to retool their plans.
They came back with programs that included cuts in jobs and costs, the sale of subsidiaries, and the demise of unprofitable models.
GM requested $A18.5 billion in short-term loans and a $A9 billion line of credit, while Ford said it needed a $A14 billion line of credit and Chrysler said it needed $A11billion by December 31.
United Auto Workers chief Ron Gettelfinger warned last week that time was short. ''I believe that we could lose GM by the end of the month,'' he said.
US poised for crucial bail-out
The short-term loan package of at least $US15 billion ($A23 billion) could be a lifeline to keep the Big Three carmakers afloat, but is about half what auto chiefs say is needed to stave off bankruptcy.
After locking horns with the White House, Democrats dropped their opposition after the issuing of gloomy official data on Friday showing 533,000 US jobs were lost last month alone.
US lawmakers worked to hammer out details of legislation to bail out ailing car companies that could be presented to Congress as early as today, after reaching an agreement in principle with the Bush Administration.
The legislation is taking shape after House Speaker Nancy Pelosi dropped her opposition to drawing on $A39billion in funds from the Energy Department intended to help car-makers develop more fuel-efficient vehicles, according to a Democratic aide who declined to be identified. ''There is no final deal, but an agreement in principle,'' the source said.
As car chiefs pleaded for an urgent rescue, Mrs Pelosi signalled her approval for a loan from the energy-efficient stimulus fund, but said the ''short-term and limited assistance'' must be swiftly repaid.
''We will not permit any funds to be borrowed from the advanced technology program unless there is a guarantee that those funds will be replenished in a matter of weeks so as not to delay that crucial initiative,'' she said.
Chiefs of General Motors, Chrysler and Ford, which employ millions of US workers, had warned of the industry's imminent demise if Congress and the White House didn't reach a compromise. on the funding.
Democrats had previously called on the White House to tap an already approved $US700 billion ($A1.1billion) finance industry bail-out known as the Troubled Assets Relief Program to rescue the firms.
But President George W.Bush insisted the money should come from diverting already approved funds that were intended to encourage the industry to develop fuel-efficient vehicles.
Media reports said the loan package could be worth $A23 billion to $A26 billion, or about half the bail-out that the Big Three chiefs said was necessary for them to survive.
Congressional aides said the package aimed to sustain automakers through to March, after President-elect Barack Obama will have moved into the White House and the new Congress is in office.
Legislation on the plan was expected to be ''brought up for a vote in the House next week'', Mrs Pelosi said.
The compromise is expected to free up the remaining half of the $US700 billion fund to bail out the financial industry.
Senate majority leader Harry Reid said he hoped his chamber would also vote on a bail-out in a lame-duck session, and pressured Republicans to help push the rescue Bill through.
''We will need support and cooperation from Republicans to determine when that vote happens and whether it will succeed,'' Mr Reid said, adding that the hearings this week ''made clear that we cannot let these companies fail''.
In the hearings before Congress Ford chief executive Alan Mulally made clear the failure of one of the Bit Three companies could result in the demise of its competitors.
''If one of us goes in, it has the potential to take all of us in,'' he said.
Some lawmakers insist the companies should use bankruptcy protection as they restructure, but auto executives maintain the move would prompt consumer confidence in their products to plummet.
In exchange for any assistance, the auto companies will have to submit to strict Government oversight to ensure loans are used effectively.
The bosses appeared at acrimonious hearings two weeks ago but were sent back to Detroit empty-handed and told to retool their plans.
They came back with programs that included cuts in jobs and costs, the sale of subsidiaries, and the demise of unprofitable models.
GM requested $A18.5 billion in short-term loans and a $A9 billion line of credit, while Ford said it needed a $A14 billion line of credit and Chrysler said it needed $A11billion by December 31.
United Auto Workers chief Ron Gettelfinger warned last week that time was short. ''I believe that we could lose GM by the end of the month,'' he said.
