Time running out to save US auto industry

Source: Agencies  |   2008-12-13  |     NEWSPAPER EDITION

THE Bush administration warned yesterday that America's economy could not withstand the collapse of the US auto industry and said it might be willing to provide emergency funding to bail out troubled car makers.

The remarks came after Congress failed to pass a bill to keep the industry afloat.

Democratic leaders and the main US auto workers union appealed to the administration, now in its last weeks, for emergency funds after a Senate deal to save Detroit's Big Three auto makers collapsed in acrimony late on Thursday.

Analysts said that without quick help, two of the country's major car manufacturers -- General Motors and Chrysler -- could face bankruptcy.

The Bush administration said it was considering tapping a US$700 billion financial industry bailout fund to prevent an industry-wide collapse.

The United Auto Workers blamed the failure of the US$14 billion compromise bailout on Senate Republicans who want more wage concessions from the union. The UAW said it was now up to Treasury Secretary Henry Paulson to find a way to bail out GM, Chrysler and Ford.

The administration had previously supported the Senate compromise measure, which had earlier passed the Democrat-controlled House of Representatives.

The Treasury said on Thursday it still believed the financial industry bailout funds were intended only to help the financial sector, while the White House said it was studying its options.

Congressional Democratic leaders Harry Reid and Nancy Pelosi already asked Bush to reconsider this position, a call echoed by some Republicans who represent districts dependent on auto industry jobs.

Polls show Americans are split on bailing out Detroit. The US auto makers are widely criticized for fighting tougher fuel efficiency standards and poor model designs that have left the companies gasping with a stable of products losing popularity with consumers.

Senator Christopher Dodd, a Connecticut Democrat, said it was possible Congress could try again at a rescue in January when Democrats will have larger majorities in both houses. President-elect Barack Obama, who takes office on January 20, favors helping the auto makers.

General Motors Corp and Chrysler LLC sought billions in aid to see them through March and have warned of potential collapse if they did not receive a bailout. Ford is in slightly better financial shape but says it needs a major line of credit.

US stocks fell yesterday, following sharp downturns in Asia and Europe. The Dow Jones industrial average was down about 2 percent in early trading.