Obama: Auto workers shouldn't take 'all the hits' in rescue plans

DETROIT -- President-elect Barack Obama isn't saying if he'll make changes to the auto industry loan package announced Friday morning by President Bush. But Obama warned auto companies Friday that "the American people's patience is running out."

He said automakers should "seize on this opportunity" to come up with plans to make their companies sustainable.

Obama also said a final restructuring package shouldn't just include concessions from auto workers. He said they shouldn't be the ones "taking all the hits."

Obama said everyone involved with the auto industry has to be "part of the process."

He said his economic team will talk with management and workers to find out how the industry and its jobs can be preserved not just in the short term, but in the years to come.

After all-night negotiations, the White House unveiled a bailout plan for the auto industry early Friday that gives automakers $13.4 billion in short-term financing.

The automakers can access an additional $4 billion in February, if Congress makes available the next $350 billion of financial bailout money.

Using the financial rescue fund to help the auto industry, along with a string of other rescue efforts, has tapped out the first half of the $700 billion fund. Treasury Secretary Henry Paulson says Congress needs to release the second half of the money, although he says he is confident the Treasury Department, Federal Reserve, and Federal Deposit Insurance Corp. have the resources to address a significant market event if one should happen before the second half of the money is allocated.

The automakers have until March 31 to prove they are viable, and President Bush said Friday that if they are unable to do that, the money must be returned to the government and General Motors gm and Chrysler, the two companies seeking the loans, will be forced into bankruptcy court.

But the plan lacks the teeth to get that accomplished, since Bush and his team will be out of office Jan. 20.

Bush, a free-market conservative, said he would have preferred to push the companies into bankruptcy "under ordinary economic circumstances."

"But these are not ordinary circumstances," he said in a speech televised from the White House. "In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action."

Bush said he was worried that bankruptcy now would be disorderly. The automakers have argued that if they filed for bankruptcy, their customer base would dry up. And they argued that the financial crisis has taken them by surprise, and they have not prepared to file for an orderly bankruptcy.

"The convergence of these factors means there is too great a risk that bankruptcy now would lead to a disorderly liquidation of American auto companies," Bush said. "My economic advisers believe that such a collapse would deal an unacceptably painful blow to hardworking Americans far beyond the auto industry. It would worsen a weak job market and exacerbate the financial crisis. It could send our suffering economy into a deeper and longer recession."

GM issued a statement saying it is grateful for the money, which will allow the company to continue operating while it works on its restructuring plan.

"It is our intention to continue to be transparent as we execute our plan, and we will provide regular updates on our progress," the company said.

Chrysler Chairman and CEO Bob Nardelli thanked the president and the Treasury Department for their confidence in the company at a time when many Americans argued the struggling companies should be allowed to go bankrupt.

"A letter of intent was signed which outlines the specific requirements that must be achieved," said Nardelli. "Chrysler is committed to meeting these requirements."

Cerberus Capital Management, which owns Chrysler, said Friday it will invest the first $2 billion of Chrysler Financial profits back into Chrysler.

Cerberus said the funding will backup the $4 billion loan Chrysler is getting from the government as part of its rescue package for the domestic auto industry.

But Cerberus said Chrysler's labor costs must be cut to the level of its foreign competitors and its debt restructured.

Bush said the rescue plan will require "meaningful concessions" from the auto companies, labor unions and suppliers. The companies, he said, "must understand what is at stake, and make the hard decisions necessary to reform."

The terms call for the United Auto Workers union to bring wages and work rules in line with non-union transplant automakers — although the plan does indicate that all the stipulations are subject to negotiation. UAW President Ron Gettelfinger is calling on the Obama administration go to "ensure that these unfair conditions are removed."

"While we appreciate that President Bush has taken the emergency action needed to help America's auto companies weather the current financial crisis, we are disappointed that he has added unfair conditions singling out workers," Gettelfinger said. "These conditions were not included in the bipartisan legislation endorsed by the White House, which passed the House of Representatives and which won support from a majority of senators."

GM will spend about $8 billion on labor costs for 2008, the company said Friday, while transplant competitors spend about $4.5 billion a year. While that figure seems to show a huge disparity, GM Chief Financial Officer Fritz Henderson says it should be adjusted for sales volume, but he did not want to release a detailed salary comparison.

"We do need to address some key issues with the UAW," Henderson said at a press conference following the announcement. While the company has cut labor costs, "We haven't completely gone at it."

The Bush administration has been weighing several approaches to assisting the automakers, including short-term loans and an "orderly" bankruptcy process for the troubled companies.

Bush said the rescue package demands concessions similar to those outlined in a bailout plan approved by the House but rejected by the Senate a week ago. It would give the automakers three months to come up with restructuring plans to become viable.

"The time to make hard decisions to become viable is now, or the only option will be bankruptcy," Bush said. "The automakers and unions must understand what is at stake and make hard decisions necessary to reform."

Bush's plan is designed to keep the auto industry running in the short term, passing the longer-range problem on to the incoming administration of President-elect Barack Obama.