Obama backs $50bn loan bid by US carmakers
US president-elect Barack Obama has made helping the troubled US car industry a “high priority” of his administration.
US motor manufacturers – including the big three of General Motors, Ford and Chrysler – have been hit hard during the economic crisis and have asked the US Congress for $50bn (€39.8bn) in loans to help the industry survive and fund its health care obligations.
Obama urged President George Bush to back the deal during his first Oval Office talks at the White House on Monday.
The Democrat has said the car industry is the “backbone of American manufacturers” and a key part of the nation’s work to reduce its dependence upon foreign oil.
General Motors (GM) reported a $4.2bn (€3.34bn) third-quarter operating loss last week and warned it may run out of operating cash by the end of June. Ford reported a $2.98bn (€2.37bn) loss for the same quarter.
During the Oval Office meeting, Obama talked about the urgency for aid to US carmakers and the need for a second economic stimulus package to help financially-strapped workers, aides to the president-elect said.
Last week, in his first press conference since his historic election, Obama warned that the financial crisis was “spilling out” into other areas of the country’s economy.
“We are going to need to see a stimulus package passed either before or after inauguration,” he said, adding that it was needed “sooner rather than later”.
Today, US Treasury Secretary Hank Paulson said he could not foresee that the $700bn rescue package for the nation’s economy, known as the Troubled Assets Relief Program (Tarp), could be used to help ailing carmakers, even though he agreed they were “critical” to the US manufacturing industry.
He said Tarp was aimed at only helping the finance industry and unblocking credit.
“I think the administration needs a solution, but it’s got to be one that leads to viability”, Mr Paulson said.
Pressure to help the troubled US car industry has come from Democratic leaders in Congress. House Speaker Nancy Pelosi said failure by one or more of the US car giants would have a
“devastating impact” on the US economy.
Assistance must be conditioned on “rigorous independent oversight” of carmakers and restrictions on executive compensation, she said.
Last week, Pelosi and Senate Majority Leader Harry Reid said in a letter to Mr Paulson that the US administration should consider expanding the rescue package to include car companies.
“A healthy automobile manufacturing sector is essential to the restoration of financial market stability, the overall health of our economy, and the livelihood of the automobile sector’s work force,” they wrote.
“The economic downturn and the crisis in our financial markets further imperilled our domestic automobile industry and its workforce.”
In the letter, which came after talks with the carmakers on Thursday, they added: “We left the meetings convinced that our nation’s automobile industry, the heart of our manufacturing sector and the jobs of tens of thousands of American workers are at risk.
“We must safeguard the interests of American taxpayers, protect the hundreds of thousands of automobile workers and retirees, stop the erosion of our manufacturing base, and bolster our economy.”
At the weekend, GM spokesman Greg Martin added: “A critical portion of the US economy rests on the industry’s shoulders.”
But White House press secretary Dana Perino said additional congressional authorisation would be needed to help the industry.
“We have gone as far as we can under the authority Congress has given us,” Perino said.
