White House to consider using finance bail-out for carmakers

Other News Materials 12 December 2008 19:49 (UTC +04:00)

The White House on Friday said it would consider using funds from the 700-billion-dollar financial rescue to bail out ailing carmakers after a plan to save the industry failed in the US Congress, dpa reported.

"It is disappointing that while appropriate and effective legislation to assist and restructure troubled automakers received majority support in both houses, Congress nevertheless failed to pass final legislation," White House spokeswoman Dana Perino said in a statement.

A last-ditch effort to pass an emergency loan that would resuscitate the ailing US car industry fell apart late Thursday after negotiations collapsed in the Senate, causing a wave of financial gloom to ripple through world markets on Friday.

After hours of bargaining, Republicans and Democrats failed to agree on a compromise deal. The bone of contention was the powerful United Auto Workers (UAW) union's refusal to agree to Republican demands for wage cuts and reduction in labour costs to the level of Japanese competitors operating in the US.

The White House had pushed for the 14-billion-dollar rescue plan from funds already appropriated for carmakers to develop greener vehicles and had stressed the financial industry bail-out was not to be used for other industries.

However, the Bush administration reversed course after that deal fell through, saying it would consider other options such as dipping into the financial fund known as TARP.

"Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms. However, given the current weakened state of the US economy, we will consider other options if necessary ­ including use of the TARP program - to prevent a collapse of troubled automakers," Perino said. "A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time."