President George W. Bush on Saturday defended his decision to give financial aid to struggling US automakers, arguing that their uncontrolled bankruptcy could plunge the United States into a deeper recession.
“The actions I'm taking represent a step that we all wish were not necessary,” Bush said in his weekly radio address. “But given the situation, it is the most effective and responsible way to address this challenge facing our nation.”
On Friday, Bush unveiled a 13.4 billion dollar rescue loan for the automakers, but demanded tough reforms in return in a move aimed at staving off a new economic calamity.
General Motors and Chrysler, facing a threat of imminent bankruptcy that could create economic chaos and throw millions out of work across the country, agreed to the terms and will get the loans starting December 29.
GM will get 9.4 billion dollars in two installments through mid-January and Chrysler up to four billion this month, officials said.
Ford said it would not be part of the loan program, which could include an additional four billion dollars from February for GM pending congressional action.
The funds will come from the Treasury's 700 billion dollar Troubled Asset Relief Program (TARP) approved in October to bail out struggling financial institutions.
Bush said that given the current state of the auto industry, White House economic advisors believed that “bankruptcy could now lead to its disorderly collapse — sending our economy into a deeper and longer recession.”
He said that a more responsible option would be to give the auto companies an incentive to restructure outside of bankruptcy and a brief window in which to do it.
“This restructuring will require meaningful concessions from all involved in the auto industry – management, labor unions, creditors, bondholders, dealers, and suppliers,” the president warned.
“Taken together, these conditions send a clear message to everyone involved in American automakers: The time to make the hard decisions to become viable is now – or the only option will be bankruptcy.”
