The Bush administration says it will consider using money from the $700
billion Wall Street rescue fund to prevent the U.S. auto industry from
collapsing. After carmaker bailout talks broke down in the Senate,
news of possible White House intervention seemed to calm financial
markets on Friday.
U.S. President George Bush has long opposed dipping into the financial bailout package approved earlier this year to keep Detroit's "Big Three' car companies afloat.
But White House Press Secretary Dana
Perino said Friday the administration is considering it. Perino told
reporters aboard the president's plane, "The current weakened
state of the economy is such that it could not withstand a body blow
like a disorderly bankruptcy in the auto industry."
Later, the Treasury Department said it "will stand ready to prevent an imminent failure until Congress reconvenes."
United Auto Workers president Ron Gettelfinger welcomed the possible change in policy.
"We do appreciate the positive statement that was released by the White House this morning, where they say that they are reviewing all options that are necessary, including the use of the Troubled Asset Relief Program to assist the [auto] industry," he said.
The House of Representatives had approved a plan to spend $14 billion in government money to keep the auto industry operating. But the Senate Thursday failed to agree on the proposal, despite backing from President Bush and President-elect Barack Obama, who says the big automakers cannot be allowed to fail.
"We cannot simply stand by and watch this industry collapse," he said. "Doing so would lead to a devastating ripple effect throughout our economy."
Some Senate Republicans said the rescue plan did not do enough to require the automakers to reform the way they do business.
General Motors said Friday it will temporarily close 20 of its factories in the U.S., Canada and Mexico, many of them for the whole month of January. GM says it will build 250,000 fewer vehicles, reducing its first-quarter production by one-third.
Japan's second largest automaker, Honda, says it will reduce North American production by 119,000 vehicles, because of lower demand.
Americans cut spending at retail stores for a record fifth straight month in November. The Commerce Department says retail sales were down 1.8 percent last month, led by a 2.8 percent drop in auto sales. Because of the plummeting sales, U.S. businesses reduced their inventories in October by six-tenths of a percent, the largest amount in five years.
Meanwhile, wholesale prices sank in November for the fourth month in a row. The U.S. Labor Department says the Producer Price Index was down 2.2 percent last month, with plummeting gasoline prices leading the way.
European Union leaders have backed a $264 billion economic stimulus package to fight off recession in their 27 member nations. French President Nicolas Sarkozy says Europe's economy is in "a very serious crisis."
Japanese Prime Minister Taro Aso is announcing a new $255 billion stimulus package to boost his country's economy. It includes efforts to increase employment, encourage lending and inject capital into financial markets.
Asian markets slumped Friday, after the U.S. Senate rejected the automakers bailout plan. Japan's Nikkei 225 index lost 5.6 percent, to 8,236. In Hong Kong, the Hang Seng fell 5.5 percent, to 14,758. And China's Shanghai Composite dropped 3.8 percent, to 1,954.
European shares closed lower Friday. London's Financial Times 100 lost 2.5 percent, to 4,280. The DAX in Frankfurt was down 2.2 percent, to 4,663. And in Paris, the CAC 40 dropped 2.8 percent, to 3,214.