Congress Delays Action on Auto Industry Loans
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This is the VOA Special English ECONOMICS REPORT.
Congress faced a big question this week, but the answer will have to wait.
The heads of the Big Three American automakers came to Washington to ask for money -- on their private jets, critics noted. The chiefs of General Motors, Ford and Chrysler asked for twenty-five billion dollars in new loans. Congress already approved twenty-five billion in September to help the industry develop fuel-efficient vehicles.
Democratic leaders in Congress proposed to offer the additional loans with money from the financial rescue program approved last month. But Treasury Secretary Henry Paulson objected. He says the seven hundred billion dollars is just for investing to strengthen the financial system.
On Thursday, a group of Senate Democrats and Republicans announced agreement on a compromise. It would let the companies temporarily use the fuel-efficiency loans to pay for daily operations. G.M. and Chrysler both say they could be out of money by early next year.
But Senate Majority Leader Harry Reid says there are currently not enough votes in Congress to pass any bailout plan for automakers. He says they failed to make their case that this appeal will be the last.
Now, the companies have until December second to explain how they would use the loans as part of a long-term plan to save their business. Congress may consider legislation the week of December eighth, but only if the plans are acceptable.
Peter Morici, a professor of international business at the University of Maryland, is among economists who oppose a bailout. He appeared at this week's hearings. He says the Big Three should be permitted to fail. If they seek bankruptcy protection, he says, they will be able to cut costs, reorganize and become competitive again.
But General Motors chief executive Rick Wagoner warned that the economy could lose three million jobs in the first year if the Big Three fail. They employ a total of about two hundred forty thousand people. But that does not include dealers or suppliers or the auto parts industry. Auto sales, though sharply reduced now, usually represent about four percent of the economy.
The industry chiefs blamed the credit crisis for keeping people from getting car loans. But lawmakers said poor business decisions have hurt the Big Three. Autodata Corporation says fifty-three percent of new cars and light trucks sold in the United States in the first ten months of this year were imported.
And that's the VOA Special English ECONOMICS REPORT, written by Mario Ritter. I'm Steve Ember.