Obama: Bush Administration Automaker Plan a “Necessary Step.”


President-elect Barack Obama Friday described President George W. Bush’s efforts to stave off the financial collapse of the nation’s automakers as a “necessary step.” Speaking at a press conference in Chicago at which he announced four more candidates to his Cabinet, Obama said “Today’s actions are a necessary step to help avoid a collapse in our auto industry that would have devastating consequences for our economy and our workers.

President-elect Barack Obama talking about Bush administration plan to bail out the Big Three auto industries, before his nomination of four other appointees to his Cabinet for the U. S. Department of Labor, Trade, Transportation, and Small Business, at the Drake Hotel on Dec. 19, 2008.
Photo by Mary C. Johns

“With the short-term assistance provided by this package, the auto companies must bring all their stakeholders together – including labor, dealers, creditors and suppliers – to make the hard choices necessary to achieve long-term viability.

“The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely necessary to save this critical industry and the millions of American jobs that depend on it while also creating the fuel-efficient cars of tomorrow.

“I know we will be headed in the right direction again when we are creating jobs, instead of losing them. And when Americans are gaining ground in terms of their incomes, instead of treading water or falling behind,” said Obama.

This morning, President George W. Bush announced the plan to give the “Big Tree” troubled auto industries short-term loans “to stave off bankruptcy while they develop plans for viability” in the future.

Bush said that under ordinary economic circumstances, he would say “this is the price that failed companies must pay” and he “would not favor intervening to prevent the automakers from going out of business.”

“But these are not ordinary circumstances,” Bush explained in a press release. “In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action.

“If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers,” he added.

Bush also said that although the new legislation earned bipartisan support from majorities in both houses of Congress, they were unable to get a bill to him before adjourning this year.

And he added that “because Congress failed to make funds available for these loans,” they will be drawn from the financial rescue package Congress approved earlier this fall.

The terms of the loans will be similar to those Congress considered last week.

The auto companies would be required to demonstrate how they would become viable. They must pay back all their loans to the government, and show that their firms can earn a profit and achieve a positive net worth. This restructuring will require meaningful concessions from all involved in the auto industry – management, labor unions, creditors, bondholders, dealers and suppliers.

In particular, automakers must meet conditions that experts agree are necessary for long-term viability – including putting their retirement plans on a sustainable footing, persuading bondholders to convert their debt into capital the companies need to address immediate financial shortfalls, and making their compensation competitive with foreign automakers who have major operations in the United States.

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