President Bush announced Friday that the Treasury Department will provide more than $17 billion in emergency loans to General Motors and Chrysler. The funds will come from the $700 billion Troubled Asset Relief Program passed by Congress.
"If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers," President Bush said.
He said the automakers' failure would exact a severe toll on a weak economy.
The companies must submit plans for restructuring and prove by March 31st of next year that they are financially viable. Unions must agree to restructured wage and benefit packages more in line with non-union workers at foreign-owned carmakers in the U.S.
The first 4:30 minutes of this report are background on the deal and reaction from auto CEOs and labor leaders.
"Under ordinary economic circumstances, I would say this is the price that failed companies must pay and I would not favor intervening to prevent the automakers from going out of business. But these are not ordinary circumstances." - President Bush
"The future for this industry could be extremely bright. And I would add, at a very important time, because the industry is now beginning a process of converting away from the technology we've used for, you know, more or less 100 years to propel our vehicles to new technology." - Rick Wagoner, CEO, General Motors
"While we appreciate that President Bush has taken the emergency action needed to help America's auto companies weather the current financial crisis, we are disappointed that he has added unfair conditions singling out workers." - United Auto Workers President Ron Gettelfinger
"I just want to make sure that, when we see a final restructuring package, that it's not just workers who are bearing the brunt of that restructuring, that they're not the ones who are taking all the hits, and others who, in the past, have enjoyed a lot more of the benefits of the auto industry somehow aren't being affected." - President-elect Barack Obama
1. Why are American car companies GM, Chrysler and Ford having financial problems?
2. What is bankruptcy?
3. Does the U.S. government help companies that are on the verge of bankruptcy? Why or why not?
1. Do you think the government should help GM and Chrysler?
2. Do you think autoworkers are getting an unfair deal? Why or why not?
3. Look at this story about the auto industry woes: specifically the parts entitled Highest Wages, Best Benefits and Other Companies, Other Models
Do you think the car companies will survive? Why or why not?
4. This week Toyota, the world's second largest automaker, predicted its first operating loss in 71 years, based on shrinking demand for vehicles and a surging yen. Does this change your opinion of the American car manufacturers?
Transcript of this report: