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US set to bail out auto majors

Source: PTI
December 10, 2008 16:55 IST
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American auto industry's Big Three appear close to securing a bailout, with Wall Street Journal reporting that the White House and top Democrats have agreed in-principle for a $15 billion rescue plan -- less than half the amount sought by GM, Ford and Chrysler.

Quoting a senior administration official and congressional aides, the Wall Street Journal on Wednesday said, "The White House and top Democrats on Capitol Hill reached agreement in principle on a sweeping rescue package for the nation's auto makers, hoping to propel action this week on billions of dollars in aid."

The legislation would provide billions in loans to the car industry in return for the United States government taking a substantial stake and a direct role in the industry's restructuring, the daily said in a report published online.

"The bill would provide short-term funds, expected to total about $15 billion, and would kick off discussions about longer-term taxpayer financing," the Wall Street Journal noted.

General Motors, Ford Motor and Chrysler have already presented their bailout proposals to the tune of $34 billion to stave off a possible bankruptcy.

The auto firms are in deep financial troubles after steep decline in their sales in recent months.

"The final pieces of the legislation, which could begin to be debated and perhaps voted on as soon as Wednesday, came together late Tuesday after several hours of dickering over terms from taxpayer protections to what the industry should give up in return for loans," the daily reported.

Moreover, the programme would be overseen by an official, widely described as an 'auto czar'.

According to the Wall Street Journal, he or she would bring together labour, management, creditors and parts suppliers to negotiate a long-term restructuring plan.

"The czar could pull back the loans if the companies don't negotiate in good faith.

"And if a company and its stakeholders can't agree on a plan, the czar would be required to recommend one, including the possibility of a Chapter 11 bankruptcy reorganisation," the report noted.

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