George Bush hands car manufacturers $17.4bn lifeline
Dan Milmo, transport correspondent
guardian.co.uk, Friday 19 December 2008 14.36 GMT
The US president, George Bush, handed General Motors and Chrysler a lifeline today by giving the struggling car manufacturers $17.4bn (£11.6bn) in short-term loans.
However, the White House warned that the former industrial giants would be forced into bankruptcy by 31 March if they did not produce viable restructuring plans over that period. The Detroit-based companies were forced to turn to the president for a cash injection after the Senate rejected a bail-out plan at the beginning of the month.
"Allowing the auto companies to collapse is not a responsible course of action," Bush said today, referring to the potentially dire consequences of a collapse on the US jobs market. He added that a bankruptcy would deal "an unacceptably painful blow to hardworking Americans" .
Today's bail-out contains many of the provisions that were attached to the proposal thrown out by the Senate. Both manufacturers will hand over warrants - options to buy shares at a certain price - that could give the government significant stakes in the businesses, and there will also be limits on executive pay.
However, the loans will not come from a $25bn fund set aside to help manufacturers retool their plants for production of environmentally friendly cars.
Instead, the cash will come from the $700bn Troubled Asset Relief Programme, which aims to recapitalise ailing banks. The president and the treasury secretary, Henry Paulson, had steadfastedly refused to use the Tarp for other industries but they admitted, following the rejection of the bail-out, that the automotive companies deserved special consideration.