Bush says US will help automakers avoid collapse

Washington: Citing danger to the US economy, the Bush administration came to the rescue of the nation's auto industry on Friday, offering $17.4 billion (Dh63.8 billion) in emergency loans in exchange for concessions from the troubled car makers and their workers.

Treasury Secretary Henry Paulson said Congress should authorise the use of the second $350 billion from the financial rescue fund that it approved in October to rescue huge financial institutions. Tapping the fund for the auto industry exhausts the first half of the $700 billion total, he said.

President George W. 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".

Bush said the companies will be required to restructure and prove by March 31 that they can survive.

"The automakers and unions must understand what is at stake and make hard decisions necessary to reform," Bush said.

The White House announced about $17.4 billion in loans for the automakers, of which about $13.4 billion would be provided in December and January.

A senior administration official said he expected Chrysler and General Motors to access the money immediately.

The funds from the auto bailout will come from the $700 billion Troubled Asset Relief Programme, which the White House had resisted using for the automakers for many months.

Conditions

But the money comes with conditions such as cutting perks and requiring the companies to prove by March 31 that they can become viable.

"These conditions send a clear message to everyone involved in the future of American automakers: the time to make hard decisions to become viable is now or the only option will be bankruptcy," Bush said.

Viability would be mean that the companies must have a positive net present value, which doesn't necessarily mean immediate profitability but would require them to reach that point relatively soon, the official said.

The three-year loans would require limits on executive compensation and other perks, and the automakers would also have to provide warrants for non-voting stocks.

The remaining $4 billion in aid is contingent on the administration seeking access to the second half of the $700 billion TARP financial rescue plan, the official said.