‘Our country cannot allow the heart of our manufacturing base to collapse,’ said U.S.

December 13, 2008 at 12:00a.m.

‘Our country cannot allow the heart of our manufacturing base to collapse,’ said U.S. Rep. Charlie Wilson.

STAFF/WIRE REPORT

WASHINGTON — With Congress gridlocked and the economy floundering, the Bush administration declared Friday it would step in to prevent the “precipitous collapse” of the U.S. auto industry and the disastrous loss of hundreds of thousands of jobs sure to follow.

A day after the sudden demise of rescue legislation in Congress, carmakers were talking with the administration and the Federal Reserve about how they could still get the billions of dollars they say they need to survive. The talks included conditions that automakers would have to meet, said GM spokesman Greg Martin.

The administration said no decisions had been made on the size or duration of the new bailout plan, or what type of concessions might be demanded from the struggling automakers, their workers, stockholders or others.

In a reversal, the most likely rescue option under consideration involved billions of dollars originally ticketed for the bailout of the financial industry. President George W. Bush had earlier declared that money off-limits to the beleaguered automakers.

General Motors Corp. and Chrysler LLC have warned they are running out of cash and face bankruptcy without some form of assistance. Ford Motor Co., which is in somewhat better shape financially, has been seeking access to a line of credit.

Underlining its difficulties, GM announced Friday it would cut an additional 250,000 vehicles from its first-quarter production schedule — a third of its normal output — by temporarily closing 20 factories across North America. The move affects most plants in the U.S., Canada and Mexico. Many will be shut the whole month of January.

Urgent requests for White House intervention to save the automakers came from President-elect Barack Obama, Republican and Democratic members of Congress and outside groups.

Ohio’s two U.S. senators, George V. Voinovich and Sherrod Brown, urged the Bush administration to use money from the $700 billion Wall Street bailout fund to provide loans to the American automotive industry.

About $15 billion from the first half of the $700 billion Troubled Asset Relief Program to assist Wall Street is uncommitted.

Voinovich said Congress “failed” the “millions of hard-working Americans” who are “worried about their jobs and providing for their families.”

Voinovich has called members of the Bush administration and had a face-to-face conversation with Vice President Dick Cheney about using the TARP funds, said Christopher J. Paulitz, the senator’s senior adviser and communications director.

“It’s the continued hope and, quite frankly, the prayers of Sen. Voinovich that it will be done,” Paulitz said.

“I’m an old mayor, and I’m an old governor, and I’m going out as the president of the U.S. [comes in] at probably one of the most uncertain times we’ve had in this country since the Depression,” Voinovich said in a Friday news conference, while discussing the potential of Bush tapping TARP funds for the auto industry. “My gut said to me, and probably to some other people, that George Bush is not going to walk away and be named George Herbert Hoover Bush.”

Brown, a Democrat from Avon, said he, too, called the White House after the Senate vote.

“Last month, Treasury Secretary [Henry] Paulson acknowledged to me that he had the authority to do this. The White House must act now to protect middle-class jobs.”

U.S. Rep. Tim Ryan said the Bush administration understands how “devastating” it would be to the economy to not provide federal loans to the auto industry.

“I think the administration clearly doesn’t want the auto industry to fall on its watch,” he added.

The administration didn’t want to provide the money to the auto industry in this fashion but now realizes it doesn’t have any other choice, said Ryan of Niles, D-17th.

U.S. Rep. Charlie Wilson of St. Clairsville, D-6th, said “our country cannot allow the heart of our manufacturing base to collapse.

“Failure of these companies would risk a domino effect which would further damage our already fragile economy,” he said. “I support the bridge loan to the auto industry because I viewed it as a good investment of taxpayer money for America and for working families.”

“Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms,” White House press secretary Dana Perino said after the failure of a $14 billion bailout bill in Congress. The legislation died when Senate Republicans demanded up-front pay and benefit concessions from the United Auto Workers that union officials rejected.

Perino added, “Given the current weakened state of the U.S. economy, we will consider other options if necessary including use of the TARP program to prevent a collapse of troubled automakers. A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time.”

TARP is the $700 billion Troubled Assets Recovery Program, the financial industry bailout plan enacted in October. All but $15 billion of the first $350 billion has been dedicated to troubled banks or insurance companies, and the Treasury Department is barred from dipping into the second $350 billion without a formal notification of Congress.

No decision has been reached about such a notification, administration officials said. If one is made, Congress could then vote to prevent the action, but it would be unlikely to prevail in a showdown with the president.

Obama, who will inherit the problem next month, even if bailout billions are handed over in the meantime, said, “My hope is that the administration and the Congress will still find a way to give the industry the temporary assistance it needs while demanding the long-term restructuring that is absolutely required.”

In a letter to Bush, House Speaker Nancy Pelosi urged the president to demand “the same tough accountability” and taxpayer protections from the automakers as was contained in legislation that cleared the House at midweek.

Michigan Rep. Thaddeus McCotter, a conservative Republican from a state where Ford, GM and Chrysler are headquartered, said, “With the legislative opportunities now exhausted, I urge the president of the United States to immediately release Wall Street TARP funds to the domestic automakers to avoid their impending bankruptcy and its consequent devastation of working families and the depression of our American economy.”

It was unclear what role was left to lawmakers after an extraordinary week in which prospects for industry relief seemed to change by the hour.

A week ago, the government reported the loss of 533,000 jobs in November, the worst monthly showing in more than 30 years.

In the days between then and now, the White House and congressional Democrats agreed on a $14 billion measure that would have extended short-term financing to the industry while establishing a powerful new “car czar” to make sure the money was used to turn the Big Three into competitive companies. That bill passed the House on Wednesday but immediately ran into opposition from Senate Republicans who said it did not go far enough.

On Thursday, they demanded the United Auto Workers union agree to accept a lower pay and benefits package that would be in line with compensation earned by workers at U.S. factories producing cars for Japanese companies such as Honda, Toyota and Nissan. In an unprecedented series of negotiations, lawmakers met with representatives of industry and labor on the first floor of the Capitol in hopes of striking a deal — the effort that ultimately collapsed when the UAW balked at the terms demanded.

At a news conference on Friday, UAW President Ron Gettelfinger accused GOP senators who blocked emergency loans of trying to “pierce the heart” of organized labor.