Bush Has Yet to Decide on Auto Bailout as Companies Idle Plants
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By Roger Runningen and Greg Bensinger
Dec. 18 (Bloomberg) -- President George W. Bush said he has yet to
decide on an auto bailout, prolonging a decision on a rescue as
companies idle plants to avoid running out of cash.
"I haven't made up my mind" on a plan, Bush said today during a forum
at the American Enterprise Institute, a research policy organization
in Washington. He said he is "worried about putting good money after
bad."
General Motors Corp., Chrysler LLC and Ford Motor Co. are shutting
about 59 factories over the next month as they struggle to adapt to
the worst sales in 26 years. GM and Chrysler have said they need $14
billion to keep operating through March.
"I'm worried about a disorderly bankruptcy and what it would do to the
psychology of the markets," Bush said. He also said he didn't want to
"dump a major catastrophe" on his successor, President-elect Barack
Obama.
Asked whether a Chapter 11 bankruptcy court restructuring is an
option, the president replied: "I think under normal circumstances, no
question, the bankruptcy court is the best way to sort through credit
and debt and restructuring.
"These aren't normal circumstances; that's the problem," he said.
The closings show how far automakers are going to conserve cash and
prune output under the pressures of a shrinking U.S. market, dwindling
access to credit for dealers and demands for advance payments by some
GM and Chrysler parts suppliers.
"No one is immune," said Ed Kim, director of industry analysis at
consulting firm AutoPacific Inc. in Tustin, California. The industry
is "imploding to a degree I've never imagined could happen, and at a
speed I'd never expected."
Plant Closings
GM, Ford and Chrysler began another round of pullbacks yesterday,
burdened by U.S. sales declines this year of 22 percent, 19 percent
and 28 percent, respectively, compared with the 16 percent average for
all automakers.
Chrysler will shut all 30 of its plants for at least a month starting
Dec. 19, and Ford plans to idle 9 of 15 North American assembly plants
in the first week of January.
Ford said its move was part of a previously announced plan to reduce
first-quarter North American production by 38 percent. GM said
yesterday that a new $370 million factory making engines for the
Chevrolet Volt electric car is being delayed to conserve cash.
The Bush administration agreed Dec. 12 to consider rescue options,
including use of the $700 billion Troubled Asset Relief Program, known
as TARP.
'Very Close'
Without a cash infusion the largest U.S. automaker and No. 3 Chrysler
may be only weeks from bankruptcy, threatening millions of jobs. Ford
isn't seeking emergency aid.
White House spokeswoman Dana Perino said today that the administration
is "very close" to deciding on a bailout plan.
"The president is not going to allow a disorderly collapse of the
companies. That is not an option," Perino told reporters at a
briefing.
Asked if managed bankruptcy is an option, Perino said "it's in the spectrum."
"There's an orderly way to do bankruptcies that provides more of a
soft landing," Perino said. "That would be one of the options. I'm not
saying that's necessarily what would be announced."
"We're very close" to a decision, although there will be no
announcement today, she said. The administration is "taking a few days
to get information from the companies," she said.
In Chicago, Obama sidestepped a question about whether the Treasury
Department should seek approval from Congress before tapping the
second half of the $700 billion TARP as part of a bailout for
automakers.
"The Treasury has not come forward with a formal request for the
second part of the TARP," he said at a news conference today, adding
that his economic team has been consulting with Treasury officials.
Obama declined to comment on negotiations with automakers and Congress
over GM and Chrysler's request for $14 billion in loans.
To contact the reporter on this story: Roger Runningen in Washington
at rrunningen@bloomberg.net
Last Updated: December 18, 2008 16:39 EST
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