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White House agrees to long-awaited rescue for US carmakers
Published in Saudi Press Agency on 19 - 12 - 2008


The White House has agreed to a 13.4-billion-
dollar emergency loan to keep the iconic US car industry alive and
avoid an even deeper economic recession in the United States,
President George W Bush announced Friday, according to dpa.
But the federal funds come with tough conditions. General Motors
Corp and Chrysler LLC will have to prove they can return to viability
or the money could be withdrawn again by March 31, likely leaving no
option other than bankruptcy.
The loan provides GM with 9.4 billion dollars and Chrysler with 4
billion dollars over December and January. GM could get another 4
billion dollars in February.
"In the midst of a financial crisis and a recession, allowing the
US auto industry to collapse is not a responsible course of action,"
Bush said in a statement at the White House.
GM and Chrysler, who had warned they faced collapse without access
to federal aid, welcomed the government's decision and promised to
use the funds to enact the painful restructuring moves demanded as a
condition for the loan.
US stocks climbed on the long-awaited announcement. The White
House had become the carmakers' only lifeline after efforts to loan
them the funds collapsed in Congress last week.
Car sales have plunged some 40 per cent in the past few months as
consumers struggled to get loans in the current financial crisis,
adding to the woes of an industry that has already been struggling to
keep up with more fuel-efficient and cheaper foreign competitors.
Ford Motor Co was the only one of the so-called Big Three that had
said they can survive without the federal funds. Both GM and Chrysler
had planned to shutter manufacturing plants in the coming months to
conserve cash.
Bush said the failure of one of the US carmakers would deal an
"unacceptably painful blow" to the world's largest economy and leave
president-elect Barack Obama with a massive crisis on his hands just
days into the new administration.
The tough restructuring moves at GM and Chrysler will include
slashing labour costs to the levels of foreign competitors and other
concessions if they hope to avoid bankruptcy in early 2009.
Both are expected to present a new business plan by February 17
and have it in place by the end of March to keep the bail-out alive,
the White House said.
"We know we have much work in front of us to accomplish our plan,"
GM said in a statement, promising to offer regular updates on its
progress.
The funds will come from the 700-billion-dollar financial rescue
package approved by Congress in October, after attempts to provide
the car industry with a separate aid package were blocked by
Republican legislators last week.
Bush had previously refused to use funds from the financial rescue
package, but said Congress' failure to act had left him with no other
choice.
"The American people want the auto companies to succeed, and so do
I," Bush said.


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