Thread: Obama asks Bush to bailout automakers

Obama asks Bush to provide help for automakers

By Jackie Calmes

Published: November 11, 2008

WASHINGTON: The struggling auto industry was thrust into the middle of a political standoff between the White House and Democrats on Monday as President-elect Barack Obama urged President George W. Bush in a meeting at the White House to support immediate emergency aid.

Bush indicated at the meeting that he might support some aid and a broader economic stimulus package if Obama and congressional Democrats dropped their opposition to a free-trade agreement with Colombia, a measure for which Bush has long fought, people familiar with the discussion said.

The Bush administration, which has presided over a major intervention in the financial industry, has balked at allowing the automakers tap into the $700 billion bailout fund, despite warnings last week that General Motors might not survive the year.

Obama and congressional Democratic leaders say the bailout law authorizes the administration to extend assistance.

Obama went into his post-election meeting with Bush on Monday primed to urge him to support emergency aid to the auto industry, advisers to Obama said. But Democrats also indicate that neither Obama nor congressional leaders are inclined to concede the Colombia pact to Bush, and may decide to wait until Obama assumes power on Jan. 20.


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Obama asks Bush to provide help for automakersEuropean tram makers stand to gain from U.S. streetcar pushStocks fall in Europe and Asia amid economic gloomSeparate from his differences with Bush, Obama has signaled to the automakers and the unions that his support for short-term aid now, and long-term assistance once he takes office, is contingent on their willingness to agree to transform their industry to make cleaner, more energy-efficient vehicles.

A week after Obama's election victory, and more than two months before he takes office, the steadily weakening U.S. economy and the prospect of many more job losses are testing his effort to remain aloof from the nation's business on the argument that "we only have one president at a time."

As the auto industry reels, rarely has an issue so quickly illustrated the differences from one White House occupant to the next. How Obama responds to the industry's dire straits will indicate how much government intervention in the private sector he is willing to tolerate. It will also offer hints of how he will approach his job under pressure, testing the limits of his conciliation toward the opposition party and his willingness to stand up to the interest groups in his own.

GM's shares tumbled on Monday to 1946 prices, closing down 23 percent to $3.36, as analysts downgraded the stock on worries it would soon run out of cash and shareholders would be wiped out by any U.S. government bailout.

Obama has been far more receptive than Bush to having the government intervene to rescue another major sector of the economy. He called automakers "the backbone of American manufacturing" in his first post-election press conference last Friday, and many thousands of their employees belong to unions that are part of the Democratic Party's base.

But Obama's stance raises the question, with the country in a worsening economic situation, where would the Democrat draw the line as president?

Bush has drawn his line at the automakers' doors, having already been forced to shelve the free-market principles of his Republican Party to bail out the financial industry over the past two months. But Republicans say he would acquiesce in aid to automakers in return for Congress's ratification of the Colombia pact and pending trade agreements with Panama and South Korea.

The outgoing and incoming presidents met at the White House in private, without staff.

The Democratic leaders in Congress, the speaker of the House, Nancy Pelosi, and the Senate majority leader, Harry Reid, have declined to call a lame-duck session for next week, as they had hoped, without assurance that Bush would support a stimulus package.

Obama has called on the Bush administration to accelerate $25 billion in U.S. government loans provided by a recent law specifically to help automakers retool. Late in his campaign, Obama proposed doubling that to $50 billion. But industry supporters say the automakers, squeezed both by the unavailability of credit and depressed sales, need unrestricted cash now, simply to meet payroll and other expenses.

On Friday, Obama said he would instruct his economic team, once he chooses it, to devise a long-range plan for helping the auto industry recover in a way that is part of an energy and environmental policy to reduce reliance on foreign oil and address climate change.

While Obama campaigned on a promise of bipartisan conciliation, his choice for his White House chief of staff, Representative Rahm Emanuel, indicated on Sunday that no such deal linking auto-industry aid and a stimulus package with trade pacts was in the cards. "You don't link those essential needs to some other trade deal," Emanuel said on ABC's "This Week."

Democrats close to both Obama's transition team and to congressional leaders seemed willing to call Bush's bluff, calculating that he would not want to gamble that GM — an iconic, century-old American corporation with business tentacles in every state — would fail on his watch and add to the negative notes of his legacy. Also, economists as conservative as Martin Feldstein, an adviser to a long line of Republican presidents and candidates, have called more broadly for stimulus spending of up to $300 billion.

The major automakers — GM, Ford and Chrysler — are each using up their cash at unsustainable rates. The Center for Automotive Research, which is based in Michigan and supported by the industry, released on Election Day an economic analysis of the impact of one or all of them failing. If the Big Three were to collapse, it said, that would cost at least three million jobs, counting autoworkers, suppliers and other businesses dependent on the companies, down to the hot-dog vendors and bartenders next door to their plants.

The center also concluded that the cost to local, state and federal governments would reach to as much as $156.4 billion over three years in lost taxes and higher outlays for things like unemployment and health care assistance. Separately, some economists say the demise of even one of the automakers could tip the current recession toward a depression.

For Bush, however, the hard-line approach is his only leverage to make the trade agreements part of his legacy. The Colombia deal, especially, is strongly opposed by organized labor groups, which are a major force in the Democratic Party, and by human-rights activists.

In the Senate and during his nomination race against Senator Hillary Rodham Clinton, Democrat of New York, Obama opposed the pacts and especially the Colombia agreement, given that country's reported human rights abuses against unionists. He insists he favors free trade, but only if trading partners agree to protections for their workers and the environment — reflecting the standard Democratic Party line since President Bill Clinton's administration.

On his campaign Web site, Obama said he would oppose the Colombia pact "if President Bush insists on sending it to Congress because the violence against unions in Colombia would make a mockery of the very labor protections that we have insisted be included in these kinds of agreements."

Organized labor is not the only interest group with influence in the Democratic Party that is weighing in as Obama plans his transition. Environmentalists are adamant that any aid be conditioned on the auto industry's dropping of its opposition to higher fuel-efficiency standards and investing more in new technology. That puts them at odds with unions, who oppose any strings, leaving it to Obama to mediate.

Both as a candidate and now as president-elect, Obama has been in contact with former Vice President Al Gore, who last year won the Nobel Peace Prize for his work on climate change. In a column published in Sunday's New York Times, Gore wrote that "we should help America's automobile industry (not only the Big Three but the innovative new start-up companies as well) to convert quickly to plug-in hybrids that can run on the renewable electricity that will be available."

Obama has said that he wants to meet with the Big Three auto executives, but advisers say no meeting is scheduled. Among his advisers who have communicated with the industry chiefs and their representatives are Jason Furman, the Obama campaign's economic policy director; John Podesta, the head of Obama's transition; and former Treasury Secretary Lawrence Summers, an Obama adviser who is under consideration to be Treasury secretary again.

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In one way I don't want to see the auto industry get bailed out by tax payers. Ford and GM and the other companies they control have been building what they thought people wanted such as large SUVs while other companies looked at stylish vehicles with decent fuel mileage.

I'd call Obama's bluff and tell him to do it himself in 2 months. I don't think Bush gives a damn about his "legacy".

Democrats close to both Obama's transition team and to congressional leaders seemed willing to call Bush's bluff, calculating that he would not want to gamble that GM — an iconic, century-old American corporation with business tentacles in every state — would fail on his watch and add to the negative notes of his legacy.

Riiiight, sounds more like Obama doesn't want to be the one who says no. Ahh decisions, decisions. Better get used to it Barry, gonna be a bumpy road for you too.

They've had the last 30 years to develope cars and trucks with better technology, and better mileage. Trouble is when they get a good one, they discontinue it. I still my 1990 Bronco II, and it hold 22 gallons of gas, and according to the trip odometer, I can go 450 to 500 miles hyway driving, or 375 to 400 miles city driving on a tank of gas. The other thing they do is when they get a good dependable engine, they again discontinue it. My Bronco has the 2.9 V-6 and it is so rugged that I think I can get another 80k to 100k miles out of it before I have to overhaul it.

Lets face it too, that were not bailing an American Company out anymore. Most of the stuff is made south of the border or overseas, and shipped home so we're being asked to bail out people in other countries? I don't think so!

They need to get their shit together and pull their heads out of the backsides.

Oh, and what about all the corporate bloated salaries? And the millions in loans to the corporate officers and higher ups, that they are not required to pay back?

I was reading in an article that was predicting this economic nightmare about 10 years ago, and the CEO, or Deputy CEO for Chrysler or Dodge, got an advance or loan from the company for around 5 million dollars, with no stipulation for repayment. But again I was told I was off on one of my conspiracy theorist ideas again.

So now that the rooster has come home to roost, we are again supposed to suck it up for the companies? What a bunch of bull.

And the other side of the blame is the labor unions who want too much for dues so they can make a mint off the folks they are supposed to represent.

Henry Ford got a bad name for being the most anti-union carmaker, but he had a good idea in that he came to the realization early that if I want to sell cars, I need to pay my workers enough so they can afford them.

The Big three have been in bed with Big oil for a long time and that is why they have not developed anything fuel efficient for the American public. They deserve to melt down just like the rest of the crooks. I am sick of the government rewarding bad behavior toward us with our own hard earned money. Yes we are still in the twilight zone!

I agree with the comment made about bailing out American companies who have plants south of the border. I am originally from a town in Canada which made auto parts for Ford, GM and Chrysler. Those manufacturers have almost totally shut down in the last 6 months. GM has shut down a plant in Ontario and Ford and Chrysler have had or in the process of massive layoffs. Even the Toyota plant next to my home town has ended one shift. The only ones who I haven't heard about hurting are the assembly lines in Mexico.

The only ones who I haven't heard about hurting are the assembly lines in Mexico.

Yes and what I find funny is they still try to promote that the autos are American made when that stopped a long time ago.