White House Green Lights Automaker Bailout

President Bush Announces $17B In Loans; Big 3 Hail Action While Union, Congressional GOP Have Gripes

(CBS/AP)  Citing imminent danger to the national economy, President Bush ordered an emergency bailout of the U.S. auto industry Friday, offering $17.4 billion in rescue loans and demanding tough concessions from the deeply troubled carmakers and their workers.

Detroit's Big Three cheered the action and vowed to rebuild their once-mighty industry, though they acknowledged the road would be anything but smooth as they fight their way back from the brink of bankruptcy.

The autoworkers union complained the deal was too harsh on its members, while Bush's fellow Republicans in Congress said it was simply bad business to bail out yet another big industry.

Mr. Bush, who signed the massive $700 billion rescue for financial institutions only this fall, said he was reluctant to approve yet another government bailout of private business. But he said that allowing the massive auto industry to collapse in the middle of what is already a severe downturn "could send our suffering economy into a deeper and longer recession."

Speaking at the White House, he also said he didn't want to "leave the next president to confront the demise of a major American industry in his first days of office."

President-elect Barack Obama, who takes office a month from Saturday, praised the administration action but warned, "The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely necessary to save this critical industry and the millions of American jobs that depend on it."

Mr. Obama will be free to reopen the arrangement from the government's side if he chooses, and the head of the United Auto Workers said the union would be appealing to the new president and the strongly Democratic new Congress on that subject.

Mr. Obama, commenting in Chicago as he named more economic Cabinet members, was noncommittal on possible changes. But he said he would "make sure that when we see a final restructuring package that it's not just workers who are bearing the brunt."

Stock prices rallied on Wall Street after Bush's announcement but faded late in the day, and the Dow Jones industrials declined 25.88 points. GM shares, however, jumped 22.7 percent and Ford shares 3.9 percent. Chrysler is not publicly traded.

Some $13.4 billion of the rescue money will be available this month and next - $9.4 billion of it for General Motors and $4 billion for Chrysler LLC, the two auto giants that have said they could be facing bankruptcy soon without government help. GM is slated to receive the remaining $4 billion in loans after more money is released from the financial rescue account. Ford says it doesn't need federal cash now but would be badly damaged if one or both of the other two went under.
Under terms of the loans, the government will have the option of becoming a stockholder in the companies, much as it has with major banks, in effect partially nationalizing the industry. Mr. Bush said the companies' workers should agree to wage and work rules that are competitive with foreign automakers by the end of next year.

An assembly line worker at GM now makes $29 an hour - equal to what a Honda worker here earns and slightly less than a Toyota employee makes, reports CBS News correspondent Anthony Mason. But when you add in benefits, pensions and legacy costs, GM, which has more than 430,000 retirees, pays its average worker $69 an hour -- $20 more than Toyota.

Even with this loan, analysts say, the automakers have to take drastic steps

"That means a lot less jobs. Instead of laying off 10 to 15,000 a month, it's gonna be 25, 30,000 a month," economist Mark Zandi told Mason.

---

Click here for details of the auto bailout
CNET's Brian Cooley: The "Detroit's A Loser" Myth
Click here to read the full text of President Bush's announcement
Click here to see details of General Motor's bailout terms
Click here to see details of Chrysler's bailout terms

---

Mr. Bush also called for elimination of a "jobs bank" program - negotiated by the United Auto Workers and the companies - under which laid-off workers can receive about 95 percent of their pay and benefits for years. Early this month, the UAW agreed to suspend the program.

Underscoring the automakers' peril - and how close the bailout is cutting to the edge - GM Chief Financial Officer Ray Young said the company expects to have the first money from the government by Dec. 29, just in time to pay suppliers.

CEO Rick Wagoner said, "The timing was specifically aligned with the timing we said we needed in order to make our payments on a timely basis, so we're right on schedule there."

The deal also calls for two-thirds of the automakers' debts to be converted to stock in the companies.

Also, Chrysler, GM and Ford were to pay billions into UAW-administered trust funds that will take over paying health care bills for hundreds of thousands of retirees on Jan. 1, 2010. The trusts, called Voluntary Employees Beneficiary Associations, were to last at least 80 years.

But if half the cash is swapped for stock, the trusts might not last that long if the value of the shares declines. Swapping stock for cash payments helps the cash-starved companies, though, because they have more money to spend on operations.

Bondholders may be left with a take-it-or-leave it proposition with the government requiring them to exchange two-thirds of their holdings for stock. But they, too, could try to negotiate with the Obama administration, said Pete Hastings, an auto industry corporate bonds analyst with Morgan Keegan & Co. in Memphis, Tenn.

If they don't take the deal, GM could wind up in bankruptcy and the bondholders would get little or nothing, Hastings said.

Though auto stocks rose on Friday, the companies' stockholders aren't out of the woods.

Provisions in the bailout agreement will force GM to produce more shares, diluting the value of its stock several times over, said Efraim Levy, a senior auto industry analyst with Standard & Poor's.

There's no way the automakers will be profitable next year, said Levy. Things could be different in 2010 if the market rebounds and cost cuts kick in, he said.

Meanwhile, Treasury Secretary Henry Paulson said Friday that Congress should release the second $350 billion from the financial rescue fund that it approved in October to bail out huge financial institutions. Tapping the fund for the auto industry basically exhausts the first half of the $700 billion total.

If the carmakers fail to prove viability by March 31, they will be required to repay the loans, which they would find all but impossible. A firm will be deemed viable only if it can show positive cash flow and can fully repay the government loans.

Friday's rescue plan retains the idea of a "car czar" to make sure the companies are keeping their promises and moving toward long-term viability.

The short-term overseer will be Paulson. But the White House deputy chief of staff, Joel Kaplan, said that if the Obama team wants someone else installed to bridge the administrations, Bush is open to that.

The White House package is the lifeline desperately sought by U.S. automakers, who warned they were running out of money as the economy fell deeper into recession, car loans became scarce and consumers stopped shopping for their vehicles.

The carmakers have announced extended holiday shutdowns. Chrysler is closing all 30 of its North American manufacturing plants for four weeks because of slumping sales; Ford will shut 10 North American assembly plants for an extra week in January, and General Motors will temporarily close 20 factories - many for the entire month of January - to cut vehicle production.

Chrysler CEO Bob Nardelli said the initial injection of capital would help the company get through its cash crisis and give it a push toward eventually returning to profitability. He said Chrysler was committed to meeting the conditions set by Bush in exchange for the money.

Though Ford didn't seek short-term aid, company President and CEO Alan Mulally said, "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."

Reaction on Congress was mixed. House Speaker Nancy Pelosi, D-Calif., said the bill gives U.S. automakers a chance to be "viable and competitive" but added the proposal "singles out workers and clearly puts them at a disadvantage."

House Republican leader John Boehner called the plan "regrettable." He said that granting loans for automakers was never the intention when Congress passed the $700 billion plan to rescue financial institutions and that the new plan "has failed both autoworkers and taxpayers."

Rep. Jeb Hensarling, R-Texas, chairman of the congressional oversight panel for the Wall Street rescue program, said a Chapter 11 bankruptcy reorganization, not loans rewarding decades of mismanagement, would have been a better decision.

Grover Norquist, president of the Americans for Tax Reform, sent a one-word letter to Bush that said in huge letters: "No."

[antoniof123]

I think the administration has finally read the hand writing on the wall.

If even one of the big 3 fail it will be the end of the Republicans seeing power for at least well maybe never again.

Have a nice day wing nuts.

[sleepyric]

There goes the stock market today...every time he opens his yap, the market tanks. Goodbye retirement IRA...thousands more lost today....mark my words...

[hitoyou11]

A wast of money. All this will do is give every one a big check. I wonder how much the UAW and the Big 3 paid Him, BUSH, to make this deal. What a wast of the tax payers money. We will never see the maony again.

[fedupman]

The Big Three automakers are forced to pay 85 to 95 percent of union wages
and benefits to members of the United Auto Workers union who aren%u2019t working
%u2013 even if their plants have been closed.%u201D

that%u2019s the contract they negotiated way back when GM caved to avoid a strike.


This one isn%u2019t purely the unions fault, the management
was idiotic to agree to a %u201Cjobs bank%u201D in the first place.


The UAW knows that if there is no bailout, they%u2019re history.
If it comes down to the union leadership figuring that they
should be making concessions, I would expect that the job bankers
would be the first thing thrown under the bus.

[betterusa]

I suppose our legislators that voted against the bailout don''t count since Bush overrides them again. What do the majority of americans want...doesn''t matter. Give the CEOs and UAW another big payday.

Hint to Detroit: build a better car with better MPG - you will sell cars again.

[fedupman]

The Big Three automakers are forced to pay 85 to 95 percent of union wages
and benefits to members of the United Auto Workers union who aren%u2019t working
%u2013 even if their plants have been closed.%u201D

that%u2019s the contract they negotiated way back when GM caved to avoid a strike.


This one isn%u2019t purely the unions fault, the management
was idiotic to agree to a %u201Cjobs bank%u201D in the first place.


The UAW knows that if there is no bailout, they%u2019re history.
If it comes down to the union leadership figuring that they
should be making concessions, I would expect that the job bankers
would be the first thing thrown under the bus.

[bigbear44035]

Let''s look at the whole picture. Real problem are trade agreements that restrict and limit US Autos into their countrys while we are flooded with theirs. Hopefully President Obama will open these one sided agreements to allow the equal numbers of cars. Cannot compete even if you have a 100 mpg car if they wont let it in to their country.

[bigbear44035]

For example, 3008 Korea sends 250,000 cars to US, we are allowed to send less than 10000 to them.

[gowens1]

another 17.4 billion in bad loans to worthless mismanaged companies. You are dumb Bush !!!!!

[craigh9]

I knew it was too good to be true - Bush chickened out on the structured bankruptcy - he just spent $17.4B on empty promises. Without the rules of bankruptcy in place all parties need to make sensible decisions and reach concensus to alter contracts - Good luck on that happening with this bunch!
$17.4B to keep them afloat long enough to get together the facts they need to come back and ask for more money - what a joke!

[georgew1956]

one third of the work force is keeping the other two thirds above wate and bush thinks three months is long enough to turn it around . that is not enough time for anyturn around and he thinks they are going to pay back billions ha, look at the last 7 yrs bush couldn''t turn a simple task around and he thinks the big 3 can do it in three months thats just enough time for him to get out and run to texas.

[shanev137]

Bailout Bush strikes again.

[shanev137]

Where are all the Bush apologists today?

Come out, come out wherever you are.

[hitoyou11]

Bush sure did the wrong thing, He just csn''t do anything right. He gave are money away.

[cadmantwo]

And nobody wants their cars in the first place!

Posted by RowdynTex

Here''s a little bulletin for you Tex... The best selling vehicle in the U.S. for the first 11 months of this year is the Ford F150 pickup. The second best is the Chevy Silverado pickup. Apparently, there are more than a few people that disagree with you.

[hitoyou11]

I want to know where he got thet the people wanted this bailout. That was a BIG LIE.

[scooter052]

All you party-liners need to come to earth for a second. Is Bush a failed President and administration? Yes! Do the lofty speeches of the new President-Elect insure he has the answers? No! The bailout of the Big 3 was inevitable. They are struggling because of the global economy. Also, keep in mind, they asked for 10% of what the financial industry received with no questions asked. Why is the global economy failing? Ask Fannie and Freddie, WaMu, Wachovia, etc. How many of these people have been indicted for underwriting untold loans that didn''t have a prayer of being paid back; yet no criminal indictments are forthcoming. $350 billion large! Where did it go? I don''t think anyone knows. Though they may not be the financial powerhouses they used to be, the Big 3 are still a huge economic indicator. Cause panic now, by not helping them and the market may go from bad to worse. Remember, the market is driven as much by perception of reality than reality itself. Panic now and the American taxpayer may as well prepare for a $1.5 trillion tab. This is a global recession, not a US recession. All the rhetoric and fancy speeches in the world won''t save any President (elect or sitting) if this situation doesn''t improve. I would love to look back in four years and say I was dead wrong. But, the verdict is still out and in four years, we all may be eating crow....literally.

[craigh9]

The workings of our political system are absolutely ridiculous - TO EVERY AMERICAN CITZEN - please find out exactly where your congressman and senators stood on this issue - and if they supported this effort and it blows up like EVERYONE EXPECTS - then be certain to VOTE THEM OUT at the very next opportunity.
When congress walks in the door - common sense goes out the window

[hitoyou11]

FORD IS SHIIITTTT. I had one, and I would not give one the a ***. It is SHHIITT. Take you FORD and the UAW and stick they both up youe AAASSSSSSSSSSSSSSSSS

[cadmantwo]

And nobody wants their cars in the first place!

Posted by RowdynTex

Here''s a little bulletin for you Tex... The best selling vehicle in the U.S. for the first 11 months of this year is the Ford F150 pickup. The second best is the Chevy Silverado pickup. Apparently, there are more than a few people that disagree with you.

[hitoyou11]

Go PISSS ON THE LITTLE 3.

[antoniof123]

I would love to look back in four years and say I was dead wrong. But, the verdict is still out and in four years, we all may be eating crow....literally.
Posted by scooter052 at 09:30 AM : Dec 19, 2008

scooter While I only posted just a couple of lines that you wrote I must say:

I NOR ANYONE COULD HAVE SAID IT BETTER. PERFECT YOU ARE CORRECT IN ALL THAT YOU SAID.

[biblethumpar]

I Certainly would not buy a spark plug from any of the Big Bankrupt-3...

[bjcone8559]

Posted by scooter052


Thank you for injecting a voice of reason. It is frustrating, however when a sitting president is all over the map concerning an issue of this magnitude. Just yesterday he was calling for an "Orderly Bankruptsy'', whatever that means. Is he going some other direction tomorrow? We will have to wait and see.

[bozworth4]

Kin George Says: Take a month off at 80% pay. Here''s the money to cover this time off. In March, politicians will give you an extension, and you (big 3) won''t have to pay any back. But be sure to come back and ask for more. Taxpayers will be just as stupid then also.

[mytoosense]

Spizer and Blago were BOTH born in the 1950''''s.

BABY BOOMER BRATS. Like Clinton and Bush. Like Paulson and Bernanke. Like Bill Gates and Jeff Skilling. Like Joseph Hazelwood and Andrew Fastow. Like 60% of Congress.

Posted by txgrouch2008 at 09:04 AM : Dec 19, 2008


What generation do you belong to txgrouch2008?

One of the latest two or three made up of spoiled brats to lasy or stupid to support themselves?
Are you in your thirties and living with your folks? Are you posting on a workday in your PJs in the same bedroom you grew up in?

[gowens1]

Bush is just busy givin away taxpayer money to his buddy CEO Republicans before he leaves office. Not like we can expect to ever see this money again, like a bad relative that''s always borrowing money and never paying you baqck.

[perceptions5]

It''s pretty bad when the Executive Branch, Bush, has to come in and perform the job funtions that our 110th Do Nothing DEMOCRAT Congress is really responsible for.

And if anyone is wondering where this worthless Democrat Congress is .......................well their on VACATION again until sometime next year.

The Democrats want all the POWER but none of the RESPONSIBILITY for governing..............worthless!

No wonder our President''s poll numbers are two to three higher then this Do Nothing Democrat Congresses..............................................very sad indeed.

And of course our NAZI-like press continues to cover for the "master party"..........their pals, the Dems

[perk235]

One of the "targets" in the Bush document:

"Wages that are competitive with those of transplant auto manufacturers by 12/31/09."

It''s no surprise that the word "BONUS" was not included in this sentence. That might affect CEO pay!

[craigh9]

These are loans. We''''re going to get the money back once the economy and the companies are on solid ground again. If we don''''t extend these loans and the workers are transformed from taxpayers to unemployment and Medicare recipients the tax bill for the country will be much higher.

Posted by Mcliar at 09:42 AM : Dec 19, 2008

This might be the case had the "loan" actually have been tied to action. All we bought we $17.4B is a promise from the greedy players that have brought these companies to the edge of closure - had we put bankruptcy rules in place change could be implemented - they way it is happening now is NOTHING happens without agreement of all parties - This money will be gone before they even come up with a plan to plan changes. We will be right back where we are today - just $17.4B poorer. What a crock!

[krannawitter]

"The best selling vehicle in the U.S. for the first 11 months of this year is the Ford F150 pickup. The second best is the Chevy Silverado pickup." - CADmanTwo

While that may be true, the sales of these two US trucks has been in a slump for years and they are falling on the list. They are down 15% and 20% respectfully just from last year. However, #3 on the list is the Toyota Camry, sales up 2.3% over the last year. Which could push it to #1 in the next year or two. #4 is a Honda with sales up 1%, #5 is also a Honda with sales up 15%! In fact, half the list is foreign vehicles with increasing sales. The only US made car with increased sales was the ford focus. Which happens two be a small, affordable, fuel efficient car.

Now I''m not here to rag on US cars. I just wanted to point out the facts. The general trend is for smaller, affordable, eco-friendly cars. If the US companies would just get competitive and make something small that runs great and doesn''t pollute, they could get it at #1 within a few years. Instead they try to sell us huge, expensive, gas guzzling lemons. No wonder their sales are down and they are about to collapse.

I''ll keep driving my foreign car. I don''t care about the US workers or companies if they aren''t going to make good products.

[tonic12345]

Under the care of George Bush our home values have collectively fallen by 2trillion dollars. He started a war where hundreds of thousands of people have died ( as bad as if not worse than Saddam Hussein because Bush lied about the need for war ) the auto industry, banking industry and all industry have suffered.

George Bush is a Terrorist. Osama Bin Laden doesn''t hold a candle to Bush.

[gowens1]

It''''s pretty bad when the Executive Branch, Bush, has to come in and perform the job funtions that our 110th Do Nothing DEMOCRAT Congress is really responsible for.

And if anyone is wondering where this worthless Democrat Congress is .......................well their on VACATION again until sometime next year.

The Democrats want all the POWER but none of the RESPONSIBILITY for governing..............worthless!

No wonder our President''''s poll numbers are two to three higher then this Do Nothing Democrat Congresses..............................
................very sad indeed.

And of course our NAZI-like press continues to cover for the "master party"..........their pals, the Dems


--------------------------------------------------------------------------------

Posted by perceptions5 at 09:46 AM : Dec 19, 2008
@@@@@@@@@@@@@@@@@@@@@@@

But it was the Republicans in the Senate that blocked the original bailout moron.....

[omega40]

I told you all this was going to happen, it was inevitable. To his credit, Bush pushed this through without Congress having to add pork in order to buy votes from those on the fence. This "loan" could have easily been a 100 billion dollar bill with only 15 billion going to the automakers.

[forever1973]

They (the automakers) should be required to make fuel-efficient vehicles for this help.

[daffy64]

President Bush has declared they shall be bailed out. Anyone who disagrees with him is a traitor to this nation.

---

Ja. Ve must do vat ze Fuhrer tell us!!!

[irmcvet971]

Obama is in favor of all bail-outs lib. Get used to it.

Posted by hillaryin016 at 09:58 AM : Dec 19, 2008

What do you mean "get used to it"? LOL Man after the 8 YEARS we''ve been through who in their right minds does NOT look forward to Obama and his Administration. What I can''t understand is you wacked out Wingnuts! It''s like YOU want to just stay with the INSANE while the ship of state sinks slowly in the WEST.

[perceptions5]

And of course our NAZI-like press continues to cover for the "master party"..........their pals, the Dems


----------------------------------

--------------------------------------
--
------

Posted by perceptions5 at 09:46 AM : Dec 19, 2008
@@@@@@@@@@@@@@@@@@@@@@@

But it was the Republicans in the Senate that blocked the original bailout moron.....


----------------------------------
----------------------------------------
------

Posted by REPUBLISCUMS at 09:53 AM : Dec 19, 2008

Your Messiah wants to bail them all out with our tax dollars lib....whats your point?

Posted by hillaryin016 at 10:00 AM

=====================================

Making more EXCUSES for Harry and Nancy in our wortholess do nothing Democrat Congress won''t make things better...............sad

[omega40]

And it got under way ON CLINTON''''S WATCH.

Posted by txgrouch2008

It was under way long before Clinton, perhaps as far back as as our first "police action" under Truman.

[irmcvet971]

So do we.

And it got under way ON CLINTON''''S WATCH.

Anyone who denys Clinton''''s role in globalization is just a filthy partisan troll.

And Enron. And WMD lies. And 9/11. And...


Posted by txgrouch2008 at 09:56 AM : Dec 19, 2008

It began on Bush 1''s watch, Clinton was just stupid enough to sign it. But the NAFTA is NOT the one that is costing us our nation. It''s ALL of them together that puts American''s in competion with Forced Labor in China. They were NOT negotiated with ALL American''s in mind and thus we find our Standard of Living falling through the Floor.

[oldnugly1]

These are loans. We''re going to get the money back once the economy and the companies are on solid ground again. If we don''t extend these loans and the workers are transformed from taxpayers to unemployment and Medicare recipients the tax bill for the country will be much higher.
======================================================

And where is it that the government got this money to dole out to corporate America, yep they have hawked you land they did.
Would it be more prudent to divide this money up with every legal citizen over 18 and let them spend their cash to get the economy going again. ''an older E-mail I read, and the logistical logic of it astounded me''

[perk235]

They (the automakers) should be required to make fuel-efficient vehicles for this help.
Posted by forever1973 at 09:53 AM : Dec 19, 2008
------------
Never happen with an oilman (Bush dynasty) making the rules.

[irmcvet971]

Your Messiah wants to bail them all out with our tax dollars lib....whats your point?

Posted by hillaryin016 at 10:00 AM : Dec 19, 2008

No! What he wants to do is extend a HELPING hand to OTHER American''s! American''s who have homes and families just like you you pathetic small little man.

[irmcvet971]

Perceptions you need a new screen name. As it is painfully and obviously apparent your percetions of things are definately very clouded.

Posted by demswin08 at 10:06 AM : Dec 19, 2008

Clouded? LOL Man these people are about as useless right now and a chunk of broken concrete! They are so afraid to change anything it''s pitiful. Really what they are saying is lets stay the course until we''re ALL in poverty!

[hitoyou11]

Bush g=has not done one thing right in almost 8 years. But I am not looking forward to Obama Osama. He will make thigns worst. He lies more then Bush.

[ford555551]

Criminal Gang led by Bush Cheney along with the republican morons (from regular to the high level) is directly responsible for the financial crisis because of greed; phony intelligence created to kill 2 million Iraqis and displaced 4 million just to take over the resources of a country. Bush first tried to over through Hugo Chavez for the same reason but did not work, so he hatched plan B, to invade Iraq. Those criminals I mean all republicans should face war criminal tribunal in Hague.

[irmcvet971]

Thats right, your Messiah blessed all of the bailouts so far and their is more yet to come. All paid for by money we dont have. Its called Socialization and your all for it right Nazi?

Posted by hillaryin016 at 10:06 AM : Dec 19, 2008

Man YOU are not even relevant to this discussion. We have MAJOR problems and YOU want to refuse to accept the decision of the American People. YOU have NOTHING of benefit to ad to this or any other discussion.

[irmcvet971]

When was the last time you heard any of the Socialist speak out against the bailouts Nazi? You wont because the Messiah is all for it.

Posted by hillaryin016 at 10:08 AM : Dec 19, 2008

Man you really need to seek some counseling! LOL I mean YOU have a problem and it is NOT politic''s!

[hitoyou11]

irmcvet971. Are you a citizen? Did you go to school? I don''t know how old you are, but you must be old. How else could you become so "DUMB"

[irmcvet971]

Bush g=has not done one thing right in almost 8 years. But I am not looking forward to Obama Osama. He will make thigns worst. He lies more then Bush.

Posted by hitoyou11 at 10:09 AM : Dec 19, 2008

What you are saying then is we can pretty much count you out of any discussion going forward if you have ALREADY made your mind up about the leader the People picked. I guess I have to admire the honest, no matter how bigoted, just wonder when the last time YOU were and American was??