US economy faces 'catastrophic collapse' without auto bailout: GM
1 hour, 26 minutes ago
WASHINGTON (AFP) - The US economy will face a "catastrophic collapse" if the government does not bail out the automotive industry, the head of General Motors told lawmakers Tuesday.
"This is about much more than just Detroit," GM chairman and chief executive officer Rick Wagoner said as he joined executives from Ford, Chrysler and the United Auto Workers Union to plead for 25 billion dollars in government-backed loans.
"It's about saving the US economy from a catastrophic collapse."
GM has said it will run out of cash as early as January if it does not get help from the government and analysts have said it would likely be liquidated if it was forced into bankruptcy protection.
Wagoner cited a recent study showing that three million jobs and more than 156 billion dollars in government tax revenues would be lost should the domestic auto industry be allowed to fail.
"I do not agree with those who say we are not doing enough to position GM for success," Wagoner said in remarks prepared for delivery.
"What exposes us to failure now is the global financial crisis, which has severely restricted credit availability, and reduced industry sales to the lowest per-capita level since World War II."
Hopes for a speedy bailout packaged have faded, however, amid strong opposition from the Bush administration and leading Republicans.
Both the White House and US Treasury Secretary Henry Paulson voiced opposition to the package Tuesday, saying Congress should instead adapt an existing 25-billion-dollar loan program aimed at helping the auto industry develop more fuel efficient vehicles.
Paulson told lawmakers that the 700 billion dollar US financial bailout program "is not a panacea for all our economic difficulties."
While Paulson said it was important to ensure that "none of the auto companies fail, particularly during this period of time," he said "there are other ways" to accomplish this.
"I believe any solution must be a solution that leads to long-term viability, sustainability viability," Paulson said at a hearing of the House of Representatives Financial Services Committee.
White House press secretary Dana Perino criticized the plan developed by Democrats because it "does not require viability."
"That is going to be a test for us to be able to actually reach a compromise," Perino said, adding the White House would continue to work with Congress and hoped to forge an agreement "this week."
But Democrats countered the long-term competitiveness of the US auto industry would be undermined if the loans intended to help underwrite technological development were used instead to help the Big Three weather the current economic downturn.
On Monday, Democratic Senate leaders in Congress opened a "lame duck" session vowing to fight for a new loan program for the auto industry.
Senate Majority leader Harry Reid hit out at Paulson for refusing to adapt the 700 billion dollar bailout approved in October to aid the auto industry, saying: "All it would take is one stroke of a pen and that problem would be solved.
"We are seeing a potential meltdown in the auto industry , with consequences that could directly impact millions of American workers and cause further devastation to our economy."
Democratic leaders would need at least 10 Republican votes to pass the bailout in the Senate and overcome the minority's obstruction tactics with a 60-seat filibuster-proof majority.
Perino pointed out that any attempt to reopen the Troubled Asset Relief Program, as the bailout is known, would not make it through the Senate, and said the White House was working with Senate Republican minority leader Mitch McConnell on the issue.
A credit crunch has made it impossible for the automakers to borrow money privately and US auto sales, which last month hit a 25-year low, are expected to sink to between 10 and 13 million vehicles next year from recent averages of 15 to 17 million.
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