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President George W. Bush on Saturday said offering government loans to U.S. automakers was the only option left to prevent the industry from collapsing after alternatives were ruled out or failed.
Bush on Friday announced the government would provide $17.4 billion in emergency loans to financially strapped General Motors and Chrysler LLC to prevent them from failing. Ford decided it did not immediately need similar loans.
In return, the carmakers would provide a restructuring plan by March 31 that would show they would survive, or they would be required to repay the loans.
Lawmakers from Bush’s own Republican Party criticized the plan, which can be changed by the incoming administration of Democratic President-elect Barack Obama after he takes office January 20.
"We have ended up with an agreement open to interpretation, that eliminates the sense of crisis, where taxpayer dollars are expended and we are left to hope that the next administration has the will to enforce the tough concessions necessary to make these companies viable for the long term," Sen. Bob Corker, a Tennessee Republican said.
Bush in a weekly radio address said his economic advisers warned that if the automakers filed for bankruptcy it would lead to a "disorderly collapse" of the industry and send the economy into a "deeper and longer recession."
After Congress was unable to pass legislation to bail out the auto industry, the only way to stave off a collapse was for his administration to step in, Bush said.
The automakers are capable of demonstrating by the end of March that they can restructure into viable companies, he said. If not, the loans would provide time for the carmakers to prepare for an "orderly" Chapter 11 bankruptcy process that offered a better prospect of long-term success, Bush said.
"This restructuring will require meaningful concessions from all involved in the auto industry — management, labor unions, creditors, bondholders, dealers, and suppliers," he said.
"The actions I’m taking represent a step that we all wish were not necessary," Bush said. "But given the situation, it is the most effective and responsible way to address this challenge facing our nation."