October 29, 2008 in Business

Automakers seeking more than bailout loans

By KEN THOMAS and TOM KRISHER Associated Press
 

WASHINGTON – Beleaguered U.S. automakers are seeking federal help beyond the money that Congress has made available for them as part of a financial industry bailout and a measure to retool their assembly plants for more fuel-efficient cars, the White House said Tuesday.

White House spokeswoman Dana Perino said the auto industry has talked to the Bush administration about funding on a much broader scale than the two programs approved by Congress earlier this fall.

“No doubt that the automakers are big important companies, important to a lot of families and important to a lot of regions in this country,” Perino said. “We are capable of competing at a level where these companies can succeed; they might just need a little help. And that’s what Congress asked us to help provide them.”

General Motors Corp. is pursuing about $5 billion to $10 billion in aid from the government, said an industry official who declined to be identified because the discussions were private. GM officials declined comment on the talks.

The requests have come as General Motors and Chrysler LLC are discussing a potential merger amid an economic downturn, weak auto sales and hardships for the companies.

GM has approached members of Congress and the administration about a number of ways that government funding could be used to help the company, including playing a part in a Chrysler deal, said a person briefed on the negotiations. The person asked not to be identified because no deal has been completed.

Perino said the “decisions about their futures – and potential mergers – will be decided by them.” Analysts have said government funding might be necessary to seal a deal because of the difficult economic conditions and frozen credit markets.

The Bush administration would have an interest in the automakers’ survival because of the magnitude of the pension obligations it would face in a bankruptcy and the potential for massive job losses.

Chrysler employs about 49,000 in the U.S. and has about 125,000 pensioners. GM has 177,000 U.S. workers and around 500,000 people receiving pensions.

The Center for Automotive Research in Ann Arbor, Mich., estimates that for each auto manufacturing job, there are 7.5 jobs with parts makers and other companies, projections that helps the auto industry account for millions of jobs.

But any role by the government in facilitating a merger between GM and Chrysler would face scrutiny from Congress because it would likely lead to significant job losses as the two companies combine operations.

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