'Progress' in US Auto Bail-out

From: 6 December 2008

Progress has been made on a multi-million dollar bail-out deal for the three big US carmakers, officials say.

Congress and the White House are holding weekend talks on the plan after two days of Congressional hearings.

White House Press Secretary Dana Perino said talks with members of both parties had been "constructive".

House Speaker Nancy Pelosi wants a vote on the plan next week, and is said to have accepted White House conditions on the source of the bail-out funding.

Bosses from the three big car companies - General Motors, Ford and Chrysler - have appeared before two Congressional committees pleading for $34bn (£23bn) to prevent collapse.

They warn the collapse of any one of them would have disastrous effects on the whole US economy.

The talks follow an announcement on Friday that more than half a million jobs were lost across the US in November, pushing the unemployment rate to a 15-year high in a dramatic indication of the country's worsening economic situation.

Hope of progress

There has been considerable opposition to a carmaker bail-out plan. Critics say the manufacturers need to first show they can be more efficient.

A key stumbling block in the rescue talks had been over a White House stipulation that the aid be drawn from a $25bn fund set aside for the production of environmentally friendlier cars, which President George W Bush wants Congress to modify.

Ms Perino said on Saturday the use of this fund for the bail-out was central to any agreement, along with requirements that taxpayers are protected and that carmakers take tough business decisions.

"Taxpayers should not be asked to finance assistance for automakers without a strong likelihood that they will be paid back," she said.

Congressional Democrats had previously insisted the money should come from a bank rescue fund - known as the Troubled Asset Relief Programme (TARP) - rather than the fund for the production of environmentally friendlier cars.

But according to Congressional sources, Ms Pelosi, a Democrat, was prepared to yield on that condition, and she has suggested that the $25bn fund could be used under certain conditions.

"We will not permit any funds to be borrowed from the advanced technology programme unless there is a guarantee that those funds will be replenished in a matter of weeks so as not to delay that crucial initiative," she said.

"Regardless of the source, all funding needs will be tightly targeted with vigorous supervision and guaranteed taxpayer protection."

The automaker-bail-out plan is a stop-gap measure intended to help the three firms survive until the administration of President-elect Barack Obama takes over in January and can craft a longer-term solution, correspondents say.

Responding to Friday's announcement that 533,000 US jobs were lost in November, Mr Obama called for urgent measures to stimulate the US economy and get people back to work.

"There are no quick or easy fixes to this crisis... and it's likely to get worse before it gets better," he said.

'Progress' in US Auto Bail-out
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