White House Moves Toward Auto Bailout

Steven Mufson
Washington Post
Saturday, Dec 13, 2008

The Bush administration yesterday moved to pull Detroit’s automakers back from the brink, saying it would drop its opposition to tapping the $700 billion financial industry rescue package to help General Motors and Chrysler survive through year’s end.

The White House said it would explore all financing options, including drawing on the Treasury’s Troubled Asset Relief Program, which until now has been used exclusively to aid banks and other financial firms. The automakers and some members of Congress were also hoping that the Federal Reserve would make a loan to aid the firms and preserve tens of thousands of jobs. But the Fed has strongly resisted such entreaties and has said it would be “extremely reluctant” to lend to the companies.

“We need these loans, and we’re not particularly fussy about how we get the loans or where they come from,” said GM board member George M.C. Fisher, retired chief executive of Eastman Kodak.

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The White House announcement set off new rounds of negotiations over the terms of federal aid, such as whether the Treasury would require management changes and how big an equity stake the government would demand in return for the use of taxpayer funds.

General Motors and Chrysler say they need the money to avoid running out of cash before the end of the year and to avert a domino effect that would threaten the viability of a variety of smaller companies that supply parts to the big manufacturers.

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