President George W Bush said deliberations by his administration on whether to tap a bank bailout fund to keep General Motors Corp and Chrysler LLC out of bankruptcy “won’t be a long process” because of the “fragility” of the US automakers.
The president, traveling on Air Force One from Iraq to Afghanistan last night, said he “signaled” his administration is considering using money from the $700 billion fund. Bush said he’s “not quite ready” to announce any rescue plan.
GM Chief Financial Officer Ray Young met yesterday with administration staff seeking agreement on the size of the short- term loans, a person familiar with the talks said. A decision may not be made on Monday, the person said.
Without an agreement, the world’s largest automaker and smaller Chrysler may be only weeks away from insolvency, both companies said in congressional hearings December 4-5. GM is reeling from almost $73 billion in losses since 2004 and a 22 per cent slump in US sales this year. The automaker last month said it lost $4.2 billion in the third quarter.
Chrysler has been battered by a 28 per cent plunge in US sales through November, the most among major automakers.
The Bush administration agreed December 12 to consider options after the Senate failed to reach a compromise on $14 billion in aid. Republicans objected to a House-passed plan that was backed by Bush.
GM and administration officials are still trying to agree on how much the automaker needs to survive until January 6 when a new Congress takes over, the person said. United Auto Workers President Ron Gettelfinger said on Sunday on CNN that he had not been contacted by the White House about the negotiations.
The dispute in Congress reflects the tension between Republican senators from Southern states that have plants owned by overseas automakers, and the Detroit-based union, which primarily supports Democrats in political campaigns, in efforts to craft a federal rescue plan. The next Congress will have a bigger Democratic majority.
GM spokesman Steve Harris said last night that there was no new information on the talks. White House spokesman Tony Fratto said “we’re not going to comment on our deliberations or timing.”
On December 12, GM Chief Executive Officer Rick Wagoner spoke by telephone with White House Chief of Staff Joshua Bolten and Treasury Secretary Henry Paulson about the automaker’s needs, a person familiar with those talks said that day.
The talks followed a statement that day by the White House that it would consider using the Troubled Asset Relief Program to help GM and Chrysler. GM Chief Operating Officer Fritz Henderson also participated in the December 12 discussions.
Senator Bob Corker, the Tennessee Republican who tried to broker the failed Senate compromise legislation, said Gettelfinger wouldn’t agree to wage and benefit cuts as part of a bid for government aid because it was sure the Bush administration would bail out the automakers.
Corker said on CBS’s “Face the Nation” that he is urging the White House to impose similar terms on the auto companies to force bondholders to take losses, push through management changes and get union workers to have wages “competitive” with workers at non-union plants. The House bill supported by Bush left those decisions up to a so-called car czar or oversight board.
Gettelfinger responded later, saying he never told Corker that he was counting on the White House.
“Why would we run the risk of knocking this down in the Senate if the urgency is what it is?” he told CNN’s “Late Edition.” “I did not tell him that.”
Gettelfinger also said on Sunday it was a mistake for his union to conduct a detailed negotiation with Congress on the matter.
The failure of the talks with Corker shows “we should keep the Congress of the United States away from the bargaining table,” Gettelfinger said. “The bargaining issue should be handled between the companies and the union.”
GM dropped 18 cents, or 4.4 per cent, to close at $3.94 on December 12 in New York Stock Exchange composite trading, and Ford Motor Co rose 14 cents, or 4.8 per cent, to $3.04.
GM shares have plunged 84 per cent this year and Ford’s have dropped 55 per cent. While Ford also is losing money, the automaker has said it’s not seeking short-term aid from the government.
The job losses may be less than the center predicts, said Mark Zandi, chief economist at Moody’s Corp.’s Economy.com. “But over a million in the first quarter of ‘09, I think, would be reasonable to expect.’’
Job losses from an automaker failure in 2009 would total 2.5 million to 3.5 million in 2009, including 1.4 million people in industries not directly tied to manufacturing, according to a November 4 report from the Ann Arbor, Michigan-based Center for Automotive Research, which does studies for government agencies and companies.
