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White House Rejects Auto Industry Bailout

Bush to Ford and GM: Fix It Yourself

By Joe Benton
ConsumerAffairs.com

December 6, 2005

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The Bush Administration has rejected pleas from Ford Motor Co. and General Motors Corp. for help winning economic and tax concessions on Capitol Hill.

The White House says the two largest U.S. auto companies do not need substantial industry-specific government help to overhaul their businesses, which are squeezed by high costs and fierce competition.

Longtime political observers noted that Ford and GM, heavily-unionized companies concentrated in largely Democratic Northern states, lack clout in the Bush Administration, which owes its existence to the non-union Sunbelt states.

Auto industry executives have attempted to avoid using the term bailout in their search though Washington for economic assistance. The administration was less gentle as the President’s top economic adviser delivered the outright rejection.

"They don't need a bailout, all they need is the time to restructure and we're confident they will be very successful," said Al Hubbard, the top economic adviser to the President.

GM and Ford are pressing Congress for a series of tax breaks and other broad-based incentives that could be worth billions of dollars as the two companies restructure in a effort to compete better with foreign rivals.

Ford CEO Bill Ford has met with White House officials several times on his proposals for an auto industry summit to save energy. Ford wants Congress to increase research and development tax credits for companies working on alternative fuels and incentives to help manufacturers convert outmoded plants.

GM and Ford have seen their margins squeezed by soaring costs for health care and raw materials and a decline in U.S. market share. Their credit ratings have fallen while substantial losses continue.

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