The White House has decided to come to the rescue of General Motors and Chrysler by providing them with $17.4 billion in low-interest loans to keep them afloat, ABC News has learned.
The money for the loans will come from the Troubled Asset Relief Program fund, signed into law this fall to bail out the financial industry. The president will provide $13.4 billion in short-term financing in December and January and plans to make another $4 billion available in February, provided it can reach into the second half of the $700 billion TARP fund to do so.
The deal also includes as a non-binding "target" a key provisions, including making work rules and wages competitive with workers at foreign car companies in the U.S.
Chrysler CEO Bob Nardelli issued a statement saying the company was grateful for the helping hand and that, "Chrysler is committed to meeting these requirements."
Pressure had been building for President Bush to act. Chrysler temporarily shut down all of its plants earlier this week to save money, and GM delayed construction on a new plant for the same reason. And House Speaker Nancy Pelosi urged Bush on Thursday to make a decision because the nation's weakened economy could not risk a massive wave of layoffs.
"This is a difficult time for a free-market person," Bush said Thursday. "Under ordinary circumstances, failed entities, failing entities should be allowed to fail. I have concluded these are not ordinary circumstances, for a lot of reasons... We got to the point where if a major institution were to fail, there is great likelihood that there'd be a ripple effect throughout the world, and the average person would be really hurt."
Treasury Secretary Henry Paulson told a business forum in New York Thursday night it was too risky to simply let the automakers fail.
"When you look at the size of this industry and look at all those that it touches in terms of suppliers and dealers… it would seem to be an imprudent risk to take," he said....More
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