Wally Edgar CHEVROLET-- President Bush Outlines The Auto Bailout

Nov. 9, 2010 - PRLog -- Washington — Former President George W. Bush defended his decision to rescue GENERAL MOTORS and Chrysler in the waning days of his term, saying he "had to safeguard American workers and families from a widespread collapse."In his new book, an advanced text of which was obtained by The Detroit News, Bush discloses he decided in early November 2008 to save GM and Chrysler — far earlier than was publicly known — and privately told his successor he would save the automakers in an Oval Office meeting.

In late December, Bush agreed to a $17.4 billion bailout for GM and Chrysler. He also agreed to invest about $7.5 billion in GMAC and Chrysler Financial LLC before leaving office.
In "Decision Points," being released by Crown Books Tuesday, Bush writes that he told Barack Obama Nov. 10, in their first meeting after the election, that he wouldn't let the auto industry collapse.

Later that week, Bush told his advisers of the decision.
"I told Barack Obama that I wouldn't let the automakers fail," Bush writes. "I won't dump this mess on him."
GM spokesman Greg Martin and Chrysler spokeswoman Shawn Morgan both declined to comment.

Bush says that in the end, he decided to rescue the two automakers because of the potential impact on the U.S. economy.
But philosophically, the former president said, he was opposed to bailouts — and noted he had opposed President Jimmy Carter's decision to rescue Chrysler in 1979.

Bush said he "believed strongly that government should stay out of the auto business. Yet the economy was extremely fragile and my economic advisers had warned that the immediate bankruptcy of the Big Three could cost more than a million jobs, decrease tax revenues by $150 billion and set back America's GDP by hundreds of billions of dollars."

In his book, the former president is harshly critical of auto company managers, and discloses that he rejected a request from then GENERAL MOTORS CEO Rick Wagoner for a bailout before the 2008 president election.
Bush blames the industry's near collapse on "decades of poor management" and said GM, Chrysler and Ford Motor Co. "had been experiencing problems for years."

The management "saddled automakers with enormous health-care and pension costs. They had been slow to recognize changes in the market. As a result, they had been outcompeted by foreign manufacturers in product and price."
Keith Hennessey, one of President Bush's top economic advisers, said his boss made a hard call to save GM and Chrysler in the final days of his presidency.

"On autos and so many other issues, President Bush confronted the choices he had to face, which were often not the ones he wanted to face.Only the hardest decisions make it up to the president, and usually every option has enormous downsides.It's easy to complain about a President's decisions from the peanut gallery. It's much harder to be the guy who actually has to choose," Hennessey said. "He accepted that his job was to make excruciating judgment calls, and he made one on autos when others would not."
He notes that the collapse of the financial sector sent auto sales tumbling, banks stopped making many car loans and the cash balances of automakers dwindled.

In early October 2008, Wagoner warned government officials that GM "would fail, and then other automakers would follow. I didn't think it was a coincidence that the warnings about bankruptcy came right before the upcoming elections," Bush writes. "I refused to make a decision on the auto industry until after the vote."

Bush said he personally favored a plan to use a $25 billion retooling program to fund the auto bailout — a move that passed the House but was blocked by Senate Republicans.
"I had hoped we could convince Congress to release those loans immediately, so the companies could survive long enough to give the new president and his team time to address the situation," Bush wrote. But "the Senate wouldn't budge."

He said the decision to tap the $700 billion Wall Street rescue fund — the Troubled Asset Relief Program — was frustrating - but became "the only option."
"Nobody was more frustrated than I was. While the restrictive short-terms were better than an outright bailout, it was frustrating to have the automakers' rescue be my last major economic decision."
But in the end, Bush said, he had little choice.

"With the market not yet functioning, I had to safeguard American workers and families from widespread collapse. I also had my successor in mind. I decided to treat him the way I would like to have been treated if I were in his position."

Obama ultimately agreed to another $60 billion bailout of the auto industry, and placed both GM and Chrysler in bankruptcy to restructure them.
The Obama administration reiterated last week it is confident it will get all of the money that it invested in GM and Chrysler — but has warned that taxpayers could lose the first $13.4 billion invested by the Bush administration.
Bush defended the terms of the loans saying he had required "stringent conditions."

He said he "wanted to use the loans as an opportunity to insist that the automakers develop viable business plans."
Those terms included new labor contracts, new agreements with bondholders and restructuring their operations.
If they failed to do so by April, he wrote "the loans would be immediately called, forcing bankruptcy."

From The Detroit News:

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