The White House caved in this morning when President Bush announced a plan to bail out the auto industry.
Chrysler, for one, turned up the heat on Mr. Bush by announcing all of its plants would close for a month.
In a statement a few minutes ago, Bush said in normal times “this is the price failed companies must pay.” But he said allowing the auto industry to collapse “is not an appropriate course of action.” He said bankruptcy is not an option because American consumers won’t buy cars from a bankrupt automakers.
Under the plan, autoworker pay and wages must be “competitive” by the end of next year. The federal government will grant billions of dollars in “loans.”
Automakers are getting 3 months to put reorganization plans into effect. If it can’t be accomplished outside of bankruptcy, the federal money will give the companies more resources to organize bankruptcy proceedings. Retirement plans will also have to be cut back.
CNBC referred to the loan as the “bridge to Obama” loan. It also noted that the private company that owns Chrysler — Cerberus Capital Management LP — isn’t putting any money into the deal.
Republicans who scuttled legislation in Congress on an auto bailout last week “shot themselves in the foot,” says John Harwood, CNBC’s chief Washington correspondent. “The situation that we’re left with now is instead of having the force of law, the terms of these loans can immediately be changed by Barack Obama when he takes office.” He says even the White House thought the Republicans were posturing last week.