Democratic leaders in Congress asked the Bush administration on Saturday to provide more aid to the struggling auto industry, which is bleeding cash and jobs as sales have dropped to their lowest level in a quarter-century.
House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid said in a letter to Treasury Secretary Henry Paulson that the administration should consider expanding the $700 billion bailout 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 imperiled our domestic automobile industry and its work force."
The administration did not offer direct comment on the request to broaden the $700 billion financial industry bailout so automakers could get a share. Treasury Department spokeswoman Brookly McLaughlin said the department is working on ways to most effectively uses the remaining dollars in the rescue to strengthen the financial system and get lending moving again.
Automakers already want an additional $50 billion in loans from Congress to help them survive tough economic conditions and pay for health care obligations for retirees. The companies are seeking the loans as part of an economic aid plan that is now more likely to come together early next year rather than in a postelection session of Congress this month.
Top executives of General Motors, Ford, Chrysler LLC and the president of the United Auto Workers met with congressional leaders Thursday to discuss the loans. The money would be on top of the $25 billion in loans that Congress passed in September to help retool auto plants to build more fuel-efficient vehicles.
"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," Pelosi and Reid said in their letter to Paulson.
Strings attached
Automakers want the new loans included in an economic aid plan that is now more likely to come together early next year rather than in a postelection session of Congress this month. If Congress approved more loans, it would come with strings attached. Potential protections include limits on executive compensation, awarding the government preferred stock in the companies and a suspension of dividend payments to investors.
GM, the largest U.S. automaker, warned Friday that it may run out of money by the end of the year after piling up $2.5 billion in third-quarter losses and burning through cash at an alarming rate.
GM's chairman and chief executive, Rick Wagoner, said the company will take every action possible to avoid bankruptcy. GM has planned more job cuts, including another 5,500 salaried and factory workers, but company officials warn that those measures alone would not be enough and that federal aid was essential.
Ford, which recently announced it would slash 2,260 white collar jobs, also has seen a rapid decline in its cash supply. Ford said it lost $129 million in the third quarter and burned through $7.7 billion in cash in the quarter.
But Ford said it is in better shape because the company borrowed billions of dollars in 2007 by mortgaging its factories. The company said it had enough cash to make it through 2009.
"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," the Democratic leaders in Congress wrote.
President-elect Barack Obama said Friday his transition team would explore policy options to help the auto industry. Obama's economic transition team includes two allies of the U.S. auto industry — Michigan Gov. Jennifer Granholm and former U.S. congressman David Bonior, a Michigan Democrat. Obama takes office in January.