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US mulls bank funds for carmakers White House considers auto rescue
(30 minutes later)
The White House says it is considering using money earmarked to rescue the US banking industry to bail out the country's struggling automakers.The White House says it is considering using money earmarked to rescue the US banking industry to bail out the country's struggling automakers.
A $14bn (£9.4bn) bail-out deal for the US car industry failed to get Senate support, raising fears of job cuts and a possible industry collapse.A $14bn (£9.4bn) bail-out deal for the US car industry failed to get Senate support, raising fears of job cuts and a possible industry collapse.
The White House said that the US economy could not withstand a body blow like the collapse of the auto industry.The White House said that the US economy could not withstand a body blow like the collapse of the auto industry.
The Federal government may have to step in, it added. The Federal government may have to step in, a spokesman added.
'Irresponsible''Irresponsible'
Earlier this year, the US approved a $700bn (£467bn) bail-out for the finance industry, known as the TARP programme. It had previously been reluctant to use this money for other industries.Earlier this year, the US approved a $700bn (£467bn) bail-out for the finance industry, known as the TARP programme. It had previously been reluctant to use this money for other industries.
"Given the current weakened state of the US economy, we will consider other options, if necessary including use of the TARP program, to prevent a collapse of troubled automakers," White House spokeswoman Dana Perino said."Given the current weakened state of the US economy, we will consider other options, if necessary including use of the TARP program, to prevent a collapse of troubled automakers," White House spokeswoman Dana Perino said.
She added that it would be "irresponsible" to further weaken the economy by allowing the Detroit car companies to fail.She added that it would be "irresponsible" to further weaken the economy by allowing the Detroit car companies to fail.
HAVE YOUR SAYThe three US auto companies need to be seriously restructured in order to survive.Chris, UKRoger, California, US
The Big Three - Chrysler, General Motors and Ford - employ 250,000 people directly, and many more indirectly, in companies making auto parts and car dealerships.The Big Three - Chrysler, General Motors and Ford - employ 250,000 people directly, and many more indirectly, in companies making auto parts and car dealerships.
The United Automobile Workers (UAW) union on Friday warned that if a bail-out was not forthcoming, the result would be "devastating."The United Automobile Workers (UAW) union on Friday warned that if a bail-out was not forthcoming, the result would be "devastating."
The union's president, Ron Gettelfinger said he was confident that there were "enough sane" people in Washington to find a solution despite the Senate's defeat of the bail out bill.The union's president, Ron Gettelfinger said he was confident that there were "enough sane" people in Washington to find a solution despite the Senate's defeat of the bail out bill.
Tense and emotional
The White House had said the plan was American carmakers' "best chance to avoid a disorderly bankruptcy".
Shares fell sharply around the world after the bail-out was rejected - with carmakers among the hardest hit. General Motors fell 10% while Ford lost 7% in early trading.
Q&A: Auto bail-out
In Asia, stocks in Toyota, Honda and Nissan all lost at least 10%.
The Republicans refused to back the bail-out after the UAW union refused to cut wages next year to bring them into line with their Japanese counterparts. UAW's current contract with the car makers expires in 2011.
"We were about three words away from a deal," said Republican Sen Bob Corker. "We solved everything substantively and about three words keep us from reaching a conclusion."
The BBC's Andy Gallacher in Washington saaid it was always going to be a battle to get the US Senate to approve the $14bn bridging loan.
With a majority of just one in the Senate, the Democrats needed some Republicans to back the bill as some in their own party were expected to vote against it.
The atmosphere in the Senate was tense and at times emotional, our correspondent says, as the Democrats made last-minute pleas to get their Republican counterparts to vote in favour of helping America's biggest car domestic makers, Ford, Chrysler and General Motors.
Millions affected
The failure of the bail-out raises the prospect of huge job losses.
The Senate majority leader, Harry Reid, said he was "terribly disappointed" when it became clear the vote had collapsed, calling it "a loss for the country".
"Millions of Americans, not only the auto workers but people who sell cars, car dealerships, people who work on cars are going to be directly impacted and affected."
The deal would have given the Big Three carmakers access to emergency funding to help them cope with the sharp downturn in sales because of the global financial crisis.
General Motors and Chrysler have said they risk ruin without immediate aid. Ford says it may need funds in the future.
The bosses of the three firms had previously asked for $34bn from Congress.
They have all seen sales fall sharply this year in the US, partly reflecting an industry-wide fall, and partly because their large gas-guzzling vehicles are no longer what customers want.