13 Dec 2008

White House considers auto rescue

3:05 pm on 13 December 2008

The White House is considering using money earmarked to rescue the US banking industry to bail out automakers in the United States.

A $US14 billion bail-out deal for the industry failed to get Senate support, raising fears of job cuts and a possible industry collapse.

The White House said that the US economy could not withstand a body blow like the collapse of the auto industry and said the federal government may have to step in.

White House spokesperson Dana Perino said it would be "irresponsible" to further damage the economy by allowing the Detroit car companies to fail.

Earlier this year, the United States approved a $US700 billion bail-out for the finance industry.

President-elect Barack Obama said he was disappointed that the Senate failed to act, adding that "millions of jobs rely directly or indirectly on a viable auto industry".

Chrysler, General Motors and Ford - employ 250,000 people directly, and many more indirectly, in companies making auto parts and car dealerships.

They previously asked for $US34 billion from Congress. All have seen sales fall sharply this year in the US.

The United Automobile Workers union warned on Friday that the result would be "devastating" if a bail-out was not forthcoming.

UAW president Ron Gettelfinger said he was confident that there were "enough sane" people in Washington to find a solution.

The White House earlier said the plan was American carmakers' "best chance to avoid a disorderly bankruptcy".

Matching cut refused by UAW

Republican Senators refused to back the bail-out after the UAW refused to cut wages next year to bring them into line with their Japanese counterparts.

UAW's current contract with the car makers expires in 2011.

The Democrats have a majority of one in the Senate and Republican votes were needed to back the bill as some Democrats were expected to vote against it.