Nov 24, 2008 12:27 pm US/Central
Obama On Auto Bailout: No Blank Checks
President-Elect 'Surprised' Big 3 Didn't Have Better Plan For Future
CHICAGO (CBS) ―
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Obama announces New York Federal Reserve Bank president Timothy Geithner (left) as his choice for treasury secretary, Christina Romer (2nd le) as Council of Economic Advisers Chair, and Lawrence Summers as director of the National Economic Council.
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There will be no blank checks for the struggling U.S. auto industry, President-elect Barack Obama said at a Monday morning press conference announcing his economic team.
Obama was critical of the Big Three automakers – Chrysler, Ford and General Motors – saying he was surprised they did not have a better-thought-out plan for their future before asking Congress to approve $25 billion in emergency loans.
The president-elect also emphasized the need to ensure the auto industry does not "vanish," but said he said "you can't just write a blank check" for the auto industry.
He said once he sees a plan, he expects "we're going to be able to shape a rescue."
Talks with Congress fell apart last week after Democratic leaders demanded the Big Three devlop a plan assuring the money would make the companies economically viable. Democratic Speaker of the House Nancy Pelosi and Senate Majority Leader Harry Reid said Congress would return to work in early December to vote on legislation if the industry leaders produce an acceptable plan.
Even if lawmakers return to vote, they are likely to insist on numerous conditions on any loans. One possibility is to seek a partial ownership of the companies. Another is to limit salaries of top executives. A third is to prohibit use of the funds for any lobbying.
Until Democratic leaders reached their agreement, the bailout had appeared headed for defeat in Congress, with the fate of hundreds of thousands of workers and Detroit's once-venerable car companies in the balance.
The leaders of the Big Three automakers painted a grim picture of their financial position during two days of congressional hearings, warning that the collapse of the auto industry could lead to the loss of 3 million jobs. Detroit's automakers, hurt by a sharp drop in sales and a nearly frozen credit market, burned through nearly $18 billion in cash reserves during the last quarter — about $7 billion at GM, almost $8 billion at Ford and $3 billion at Chrysler. GM and Chrysler said they could collapse in weeks.
"I don't believe we have the luxury of a lot of time," GM CEO Rick Wagoner told a House hearing.
Alan Mulally, the CEO of Ford Motor Co., said the company had enough cash reserves to make it through 2009. But United Auto Workers union president Ron Gettelfinger said a bankruptcy could spawn others.
"If there's a Chapter 11 (for) one of the companies, it will drag at least one other with them, if not all of them. And I do not believe Chapter 11 is where it will end. It will go to liquidation," Gettelfinger said.
The stakes are high. The Detroit automakers employ nearly a quarter-million workers, and more than 730,000 other workers produce materials and parts that go into cars. About 1 million more people work in dealerships nationwide. If just one of the automakers declared bankruptcy, some estimates put U.S. job losses next year as high as 2.5 million.
The Associated Press contributed to this report.
(© MMX, CBS Broadcasting Inc. All Rights Reserved.)
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