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Carmakers scramble as White House vows rescue

Latest update : 2008-12-13

Following the Senate's failure to pass a rescue plan, the White House says it may tap into a financial bailout fund. But the Big Three's woes continue, with GM declaring it will idle 30 percent of its North American production.

AFP - The US auto industry drama intensified Friday as the White House vowed to avert a collapse of the sector following a breakdown in talks with senators over a 14-billion-dollar rescue.
   
In a sign of the economic woes spreading, General Motors said it would idle 30 percent of North American production in the face of weak demand.
   
Around the world, European leaders meanwhile pledged to implement stimulus plans to ease the slump, Russia acknowledged it had entered recession and Ecuador's president refused to pay part of its foreign debt.
   
In Washington, the administration of President George W. Bush said it was ready to prevent the collapse of the US auto industry.
   
"Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry," Treasury Department spokeswoman Brookly McLaughlin said.
   
The White House said it may tap into the government's 700-billion-dollar bailout fund for the finance industry to help the automakers.
   
"Given the current weakened state of the US economy, we will consider other options if necessary -- including use of the TARP program -- to prevent a collapse of troubled automakers," said spokeswoman Dana Perino, referring to the Troubled Asset Relief Program conceived to help financial services firms.
   
Perino declined to say when a decision on tapping the TARP would be made, but said the White House understood "the urgency of the situation."
   
The auto rescue deal passed the House of Representatives this week but collapsed in the Senate late Thursday amid stiff opposition from Republicans, who demanded that wages paid by the US firms be brought into line with those at foreign-owned non-union plants.
   
The measure would have required the manufacturing giants to engage in restructuring to ensure their long-term survival and repayment of the government loans or face bankruptcy proceedings.
   
General Motors announced meanwhile it was idling 30 percent of its North American production "in response to rapidly deteriorating market conditions."
   
The struggling auto giant, which has been pleading for an emergency government loan to avert collapse, said the action comes in response to an industrywide 26-percent drop in November vehicle sales and a 41-percent drop for GM.
   
"The impact of these and recently announced actions to adjust production with market demand, will result in the temporary idling of approximately 30 percent of GM's North American assembly plant volume during the first quarter of 2009, and will remove approximately 250,000 units from production," GM said in a statement.
   
Fresh data showed US retail sales slumped 1.8 percent against tight credit conditions as consumers cut back on their spending in the face of large losses in jobs and wealth.
   
Also in November, US wholesale prices fell 2.2 percent led by plunging energy prices for the fourth straight month of decline.
   
In Europe, Spanish banking giant Santander said it would slash 1,900 jobs at its three British subsidiaries next year to cut costs, a day after US-based Bank of America announced cuts of up to 35,000 jobs worldwide.
   
The European Union agreed to a 200-billion-euro (260 billion dollar) stimulus plan in which members would pump on average the equivalent of 1.5 percent of gross domestic product into their economies to dig the 27-nation bloc out of recession.
   
"Everybody absolutely agrees on the gravity of the crisis," French President Nicolas Sarkozy said after chairing an EU summit in Brussels. "Everybody agrees on the need for a stimulus plan."
   
In Geneva, WTO chief Pascal Lamy scrapped plans for a ministerial meeting aimed at clinching a global free trade deal this year, dealing a blow for supporters who had claimed an agreement would boost the world economy.
   
In Moscow, Deputy Economic Development Minister Andrei Klepach was quoted as saying by Interfax: "The recession in Russia has already begun and I am afraid this will not end in two quarters."
   
Ecuadoran President Rafael Correa said the country would refuse to pay part of its foreign debt due to irregularities in the contract, three days ahead of a default deadline.
   
The announcement affects some 30.6 billion dollars in outstanding bond payments.
   
To battle what he called a once-in-a-century recession, Japanese Prime Minister Taro Aso announced a new 23-trillion-yen (255 billion dollars) injection that will take government revival efforts to more than 550 billion dollars since October.
   
"This is a great global recession which comes once in 100 years. Japan alone cannot stay out of this tsunami," Aso said. "But by taking appropriate measures without any delay, we can minimize the impact."
   
World stock markets fell hard in Europe and Asia and struggled on Wall Street.
   
The Dow Jones Industrial Average gained 0.75 percent to close at 8,629.68, shaking off early losses.
   
The Nasdaq composite rallied 2.64 percent to 1,540.72 and the broad Standard & Poor's 500 added 0.70 percent to 879.73.
   
"Wall Street survived an unnerving start and finished on an upbeat note today, as confidence grew that the government will not let automakers fail," said Al Goldman at Wachovia Securities.
   
The dollar tumbled below the key 90 yen level for the first time since 1995 and after the auto talks collapse.

Date created : 2008-12-13

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