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.
