Automakers Grab Loans, Look to Obama White House

The autoworkers union complained the deal was too harsh on its members, while Bush's fellow Republicans in Congress said it was simply bad business to bail out the industry using money from the $700 billion rescue program for financial institutions.

Electrician Brian Thorne, a 13-year employee of the General Motors metal fabricating plant in Parma,...

Electrician Brian Thorne, a 13-year employee of the General Motors metal fabricating plant in Parma, Ohio, talks outside the facility about the announcement by President Bush of a new bailout plan for US auto makers on Friday, Dec. 19, 2008. Autoworkers took home an early holiday gift Friday with President Bush's offer of $17.4 billion in emergency loans to beleaguered U.S. car makers. (AP Photo/Jason Miller)

(AP)

Obama, who takes office a month from Saturday, praised Bush's action but said the companies "must not squander this chance to reform bad management practices and begin the long-term restructuring" absolutely necessary.

Obama will be free to reopen the arrangement from the government's side if he chooses, and the head of the United Auto Workers said the union would be appealing to the new president and the strongly Democratic new Congress on that subject.

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Some $13.4 billion of the rescue money will be available this month and next — $9.4 billion for General Motors Corp. and $4 billion for Chrysler LLC, which have said they could be facing bankruptcy soon without government help. GM is set to receive the remaining $4 billion in loans after more money is released from the financial rescue account. Ford Motor Co. says it doesn't need federal cash now but would be badly damaged if one or both of the other two went under.

Under terms of the loans, the government will have the option of becoming a stockholder in the companies, much as it has with major banks, in effect partially nationalizing the industry. Bush said the companies' workers should agree to wage and work rules that are competitive with foreign automakers by the end of next year.

And he called for elimination of a "jobs bank" program — negotiated by the UAW and the companies — under which laid-off workers can receive about 95 percent of their pay and benefits for years. This month, the UAW agreed to suspend the program.

The deal also calls for two-thirds of the automakers' debts to be converted to stock in the companies.

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