US carmakers rescue plan in doubt

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More doubts have been raised about chances of a US car industry rescue plan being approved by Congress soon.

Leading US carmakers say they need a $25bn (£17bn) emergency loan to avoid collapse before the end of the year.

The Democratic party, which has a majority in both houses of Congress, wants to vote on the bailout package in a session starting next week.

But Republicans are getting more reluctant to give additional money to the carmakers.

They favour speedy distribution of another $25bn loan approved by Congress in September to help the companies make more fuel-efficient vehicles.

Of course, if it is illegal state aid, we will act at a WTO level Jose Manuel Barroso, European Commission president

Democratic leaders want Ford, General Motors and Chrysler to get a part of the $700bn bailout for financial institutions already approved by Congress.

However, Republicans' support will be vital for the new emergency package to be approved by lawmakers, as the Democratic majority is not enough to pass the plan.

Meanwhile, European Commission president Jose Manuel Barroso told Europe 1 radio: "We are in the process of analysing the plan. The plan has not yet been presented yet.

"Of course, if it is illegal state aid, we will act at a WTO level," he added.

Concessions

Democrat Christopher Dodd, Senate banking committee chairman, is sceptical that enough Republicans would support the package.

"Right now, I don't think there are the votes. I want to be careful of bringing up a proposition that might fail," he said.

Other companies will take up the slack should they vanish James Schrager, University of Chicago's Booth School of Business

Republicans want the carmakers to make certain concessions.

"They should take every step possible, including cutting executive salaries and bonuses, and exhaust all alternatives before coming to the taxpayers for tens of billions of dollars in help," said Charles Grassley, the senior Republican on the Senate finance committee.

"Spending billions of additional federal tax dollars with no promises to reform the root causes crippling automakers' competitiveness around the world is neither fair to taxpayers nor sound fiscal policy," the House Republican leader, John Boehner, said in a statement.

Grim estimates

Some analyst suggest local businesses could play a serious role in deciding the future of the emergency loan for the three biggest US carmakers.

Bruce Josten, a lobbyist for the US Chamber of Ccommerce, thinks that if car dealers get involved in the lobbying process, it could bring "a lot of heat" on lawmakers.

Kristin Sziczek, an analyst at the Center for Automotive Research, estimates that if operations at Ford, General Motors and Chrysler were cut in half, it would lead to 2.5 million jobs being cut and $125bn in personal income lost in a year.

"Other companies will take up the slack, should they vanish," said James Schrager at the University of Chicago's Booth School of Business.

Meanwhile, in another sign of difficult times for the car industry, it has been reported that European car sales fell almost 15% in October, with GM's sales down 25%.

Ford sales in Europe declined by 12.4% in October, though the company managed to increase its market share there.