White House suggests it might use TARP funds for auto makers
The White House on Friday indicated it might tap into the $700 billion Troubled Assets Relief Program to provide funding to Big Three automakers after the Senate failed to pass legislation providing loans allowing them to revamp their operations.
The Bush administration had refused to use TARP funding to assist them, but it bowed Friday out of fear a bankruptcy filing by at least one of the Big Three could reverberate throughout the economy.
White House Press Secretary Dana Perino said, "The current weakened state of the economy is such that it could not withstand a body blow like a disorderly bankruptcy in the auto industry." Perino said the automakers, unions and other stakeholders should be "prepared to make the meaningful concessions necessary to become viable."
The Treasury Department said it is prepared "to prevent an imminent failure until Congress reconvenes." The department will have to construct the terms for short-term funding for at least General Motors Corp., and possibly Chrysler LLC, so they can make it into next year.
The White House announcement came as the United Auto Workers and Sen. Bob Corker, R-Tenn., traded barbs over who was to blame for the breakdown of the talks. The public relations battle is important because Congress is expected to revisit the issue early next year, and the auto companies are expected to need additional funding, likely far more than $14 billion proposed in the Senate bill, to complete revamping.
The UAW argued that union-busting was at the heart of the Senate GOP strategy. UAW President Ron Gettelfinger blamed the Senate GOP caucus for not agreeing on the deal he struck with Corker.
The tentative agreement required bondholders and retirees -- who have company-funded health care -- to give up their claims for equity in the companies. But the talks broke down over setting the date on which UAW would cut worker conpensation to those of foreign-based competitors.
The union wanted 2011, while Corker advocated for next year. "Sen. Corker admitted to our people ... that the other discussions over wages were largely about politics within the GOP caucus," Gettelfinger said at a news conference in Detroit.
Conservatives sought to blame the UAW for negotiating overly generous salaries that they say have put the Big Three at a competitive disadvantage.
"Americans are getting to see first hand what it's like to negotiate with the union bosses at the UAW. It's heads they win, tails you lose," said Sen. Jim DeMint, R-S.C.
Corker said he found it surreal that negotiations failed after the sides were "literally three words" from an agreement. He noted his proposal did not call for UAW workers to reach salary parity with workers at foreign-owned plants by 2009, only that they should be "competitive" by that year.
That phrase was deliberately vague, he noted, pointing out that the bill left it to President-elect Barack Obama's incoming secretary of Labor to determine what constitutes "competitive." Corker said a deal could have been struck if Gettelfinger was there in person rather than relying on a representative. He acknowledged Senate Republicans have lost leverage. "I think Ron believes that TARP money is coming in, so he probably" does not wish to continue negotiations, Corker said.
Dan Friedman and Larry Lipman contributed to this report.