Car dealer applauds $17.4 billion emergency auto bailout loan

An area car dealer is applauding President Bush's offer of $17.4 billion in emergency loans to the auto industry.

"For the economy it's a good deal," said Tim Coad, whose has two dealerships in Jackson, one in Cape Girardeau and another in Anna, Ill. "It's seen as responsible on the government's part.

"But really, this is more about the economy than the auto industry," he said. "And this will be good for the employees and suppliers of the industry as a whole."

Early today, the Bush administration offered the emergency loans in exchange for concessions from the deeply troubled carmakers and their workers.

At the same time, Treasury Secretary Henry Paulson said Congress should authorize the use of the second $350 billion from the financial rescue fund that it approved in October to rescue huge financial institutions.

President Bush said, "Allowing the auto companies to collapse is not a responsible course of action." Bankruptcy, he said, would deal "an unacceptably painful blow to hardworking Americans" across the economy.

One official said $13.4 billion of the money would be available this month and next, $9.4 billion for General Motors Corp. and $4 billion for Chrysler LLC. Both companies have said they soon might be unable to pay their bills without federal help. Ford Motor Co. has said it does not need immediate help.

Bush said the rescue package demanded concessions similar to those outlined in a bailout plan that was approved by the House but rejected by the Senate a week ago. It would give the automakers three months to come up with restructuring plans to become viable companies.

If they fail to produce a plan by March 31, the automakers will be required to repay the loans, which they would find very difficult.

"The time to make hard decisions to become viable is now, or the only option will be bankruptcy," Bush said. "The automakers and unions must understand what is at stake and make hard decisions necessary to reform."

Bush's plan is designed to keep the auto industry running in the short term, passing the longer-range problem on to the incoming administration of President-elect Barack Obama.

U.S. Sen. Kit Bond praised the action, calling the requirements by the Bush administration critical to ensuring competitiveness and long-term viability in the industry.

"Today's action is important news for the millions of hard-working American workers and families dependent on the auto industry who are worried about getting pink slips right before Christmas," Bond said in a written statement today. "Taxpayers can rest assured that as a condition for receiving these loans auto companies must fundamentally restructure their operations to become competitive and profitable again.

The Repbulican senator from Missouri has been a supporter of recent auto industry legislation. The state is home to five auto manufacturing plants. "Auto jobs form the backbone of American manufacturing, especially in the Midwest," said Bond. "I will continue to hold both the Administration and companies' feet to the fire to ensure these reforms are enacted and taxpayers are protected."

The White House package is the lifeline desperately sought by U.S. automakers, who warned they were running out of money as the economy fell deeper into recession, car loans became scarce and consumers stopped shopping for cars.

The carmakers have announced extended holiday shutdowns. Chrysler is closing all 30 of its North American manufacturing plants for four weeks because of slumping sales; Ford will shut 10 North American assembly plants for an extra week in January, and General Motors will temporarily close 20 factories — many for the entire month of January — to cut vehicle production.

Bush said the auto manufactures have faced serious challenges for many years: burdensome costs, a shrinking share of the market and plunging profits. "In recent months, the global financial crisis has made these challenges even more severe," he said.

The president said that on the one hand, the government has a responsibility not to undermine the private enterprise system, yet on the other hand, it must safeguard the broader health and stability of the U.S. economy.

"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 said.

"Under ordinary economic circumstances, I would say this is the price that failed companies must pay," the president said. "And I would not favor intervening to prevent the automakers from going out of business. But these are not ordinary circumstances.

"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."

Chrysler CEO Bob Nardelli thanked the administration for its help.

In a statement this morning, Nardelli said the initial injection of capital will help the company get through its cash crisis and help eventually return to profitability. He said Chrysler was committed to meeting the conditions set by Bush in exchange for the money.

Southeast Missourian business reporter Brian Blackwell contributed to this report