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Both candidates vow to aid ailing auto industry

The next president is likely to face decisions that run to the domestic auto industry's very core: their survival. Both candidates have vowed to help.
Candidates Auto Industry
Republican presidential hopeful Sen. John McCain, left, talks to Chrysler CEO Bob Nardelli at the Detroit auto show early this year.Paul Sancya / AP
/ Source: The Associated Press

In Rust Belt states home to thousands of autoworkers, Barack Obama and John McCain have offered plans to develop advanced vehicles key to rebuilding U.S. automakers. But the next president may face decisions that run to the domestic auto industry's very core: their survival.

In the final weeks of the presidential campaign, General Motors has been discussing a potential acquisition of Chrysler and pressing the Bush administration for government assistance that could seal the deal between the two industrial giants.

Both campaigns have declined to take specific stands on the auto talks, which have been private, but they have vowed to help the industry build a green economy and reduce its dependence upon imported oil. Obama said Thursday that, if elected, he would meet with the leaders of the U.S. automakers and the United Auto Workers union shortly after Tuesday's election.

The falling fortunes of General Motors Corp., Chrysler LLC and Ford Motor Co., along with auto suppliers, have brought promises of billions of dollars in aid from the two campaigns to develop plug-in electric vehicles and advanced batteries.

It comes during one of the worst years for the auto industry in more than a decade. Auto sales have dropped sharply, the credit freeze has made it difficult for car shoppers to get loans and all three companies face uncertainty.

Any merger could factor into the presidential transition and early days of the next administration. GM is seeking billions of dollars in federal aid, an amount that is expected to dwarf the $1.5 billion loan guarantee for Chrysler approved by Congress in 1979.

GM has been talking with the Bush administration for much of October about government aid to help keep the company running or to facilitate a merger. The automaker is in talks with Chrysler majority owner Cerberus Capital Management LP about a consolidation, but a person briefed on the talks said Friday it's unlikely any deal will be reached before the election.

Although talks continue about GM somehow accessing part of the $700 billion Wall Street bailout program, the person said government aid could come more quickly from the $25 billion in loans that Congress approved in September to develop more fuel-efficient vehicles. The person asked not to be identified because the talks are confidential.

The auto industry's hardships could play into the minds of voters throughout the Midwest. The UAW has targeted voters in Michigan, Ohio, Indiana and Pennsylvania, where more than half its 1 million active and retired members live.

Obama and McCain supported the $25 billion loan program for domestic automakers and their suppliers. Both campaigns have urged the Energy Department to get the funding into the pipeline as the first step to help the industry rebound.

McCain said in an interview Friday with ABC's "Good Morning America" that he would push to get the loans to the automakers quickly. "I would do whatever I think needs to be done to help out the auto industry. We need to keep this industry alive," McCain said.

Obama, who has supported doubling the loan funding to $50 billion, wants to keep "every option on the table," said Jason Furman, Obama's economic adviser.

Auto industry supporters see the presidential candidates as future allies. Michigan Gov. Jennifer Granholm, an Obama supporter, said the Illinois senator's support for the low-interest loans and additional funding indicates "he does not want to see this auto industry go under."

Rep. Fred Upton, R-Mich., meanwhile, credits McCain with helping convince wavering Republicans and the White House that the retooling loans were needed. During a tour of a GM facility in July, Upton recalled McCain telling GM Chairman and CEO Rick Wagoner, "I know the importance of this industry to the country. When you need something, you call me direct. I'm going to be there."

Obama has set an ambitious goal to get 1 million plug-in vehicles on the roads by 2015 and expressed interest in converting the White House fleet to plug-ins, if security allows. He has promised $4 billion in loans and tax credits to U.S. automakers to modernize older assembly plants to produce advanced vehicles.

For consumers, he's discussed a $7,000 tax credit for buyers of early model plug-ins, similar to a measure approved by Congress last month.

McCain has proposed a $300 million prize for researchers trying to develop a better automobile battery. Advanced batteries are crucial for the Chevrolet Volt, an electric vehicle GM plans to begin selling in 2010. McCain would also offer $5,000 tax credits for consumers who buy new zero-emission vehicles.

On fuel efficiency, Obama has urged a 4 percent annual increase in the standards so the fleet of new cars and trucks would reach 40 miles per gallon by 2022. That's more aggressive than a plan adopted by Congress last year requiring the fleet to hit 35 mpg by 2020.

McCain has not proposed increases beyond the new requirements but has a mixed record on fuel economy standards. With Sen. John Kerry, D-Mass., in 2002 he proposed raising fleetwide standards to 36 mpg by 2016, but opposed increasing the standards in 2003 and 2005.

The auto industry is watching California's effort to cut carbon dioxide emissions by 30 percent by 2016. At least 16 states want to impose similar rules, which would boost fuel efficiency in new vehicles to about 36.8 mpg, but the Environmental Protection Agency denied California's request for a waiver from federal regulations.

Both McCain and Obama have said they would sign the request but have expressed support for a single, national standard.

David Cole, president and CEO of the Center for Automotive Research, said both candidates have recognized the trouble facing the auto industry, leaving few major differences between the two senators.

"We're in a period where the politics are almost irrelevant when you're looking at this kind of an economic challenge," he said.