Saturday, December 13, 2008
After a plan to bail out three large American auto companies failed to pass the Senate this week, the White House has said that it is considering using some of the US$700 billion earmarked to rescue the banking industry to bail out the automakers.
The White House says that the collapse of the automakers would be a terrible setback that could destroy the economy.
“Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms. However, given the current weakened state of the US economy, we will consider other options if necessary – including use of the TARP [Troubled Assets Relief Program] programme – to prevent a collapse of troubled automakers,” said Dana Perino, the White House Press Secretary. “A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time.”
Earlier this week, the “Big Three” automakers – Ford, Chrysler, and General Motors – had pleaded before Congress to be given $14 billion in funds so as to prevent collapse. Although the House approved the measures, the Senate voted the proposition down with a vote of 52-35. Part of the failure of the bill to pass was due to disagreements over labour cuts, which the Republicans insisted reach parity by next year with those of Japanese carmakers.
General Motors stated that the company would stop 30% of its North American production “in response to rapidly deteriorating market conditions”.