WASHINGTON - Citing imminent danger to the national economy, President Bush ordered an emergency bailout of the U.S. auto industry yesterday, 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.
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."
Some $13.4 billion of the rescue money will be available this month and next - $9.4 billion of it for General Motors Corp. 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 Motor Co. 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. Bush said the companies' workers should agree to wage and work rules that are competitive with foreign automakers by the end of next year. And he 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. *