Bush unveils $17.4bn car bail-out

President George Bush

The US government will provide $17.4bn (£11.6bn) in loans to troubled carmakers GM, Chrysler and Ford.
President George W Bush said allowing the US car industry to fail would not be “a responsible course of action”.

Carmakers will get $13.4bn in short-term financing from the $700bn Wall Street bail-out, and another $4bn will be provided later.

The government set a deadline of 31 March for the firms to become viable, officials said.

“The question now is how to excite consumers to buy cars from January to March. We’re all sitting on millions of dollars of unmoving cars,” said Raymond Ciccolo, a GM dealer.

“The American people want the auto companies to succeed and so do I,” said President Bush.

He said that if the carmakers collapsed, the US economy would be sent into a deeper and longer recession.

However, Mr Bush said that US carmakers must make hard decisions as the industry needs to be reformed.

The restructuring would require “meaningful concessions from all involved in the auto industry”, he added.

‘Critical situation’

Officials said that General Motors and Chrysler were expected to take up the loan offer immediately.

Ford, the third of the “Big Three” carmakers, is seen as a company that does not need the money at this stage.

An attempt to secure a $14bn (£9.4bn) rescue fund for the carmakers was rejected by the Senate last week, raising fears of job cuts and a possible industry collapse.

The package announced by Mr Bush on Friday does not need Congressional approval as it is part of the existing $700bn bail-out programme.

All car firms have announced production cuts as the economic slowdown has slashed car sales.

Chrysler, Ford and GM have repeatedly warned that millions of jobs could be lost if the government does not agree to a package of loans to support the industry.

“These loans were desperately needed before the end of December because the situation for the automakers is so critical,” said Dennis Virag at Automotive Consulting Group.

Meanwhile, US Treasury Secretary Henry Paulson urged Congress to authorise the use of the second half of the $700bn Wall Street bail-out, as the first $350bn had already been committed.

Source: BBC

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