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White House rejects auto bailout
Democrats prepare for battle in senate over funds for ailing industry.
Last Modified: 17 Nov 2008 17:49 GMT
Obama has said any bailout of the industry
should not be unconditional [EPA]

Funds from the $700bn US government bailout package for the financial system should not be used to aid America's troubled auto industry, the White House says.

Dana Perino, White House spokeswoman, said on Monday that the funds should come instead from a separate $25bn loan programme developed by the US department of energy.

"This is the appropriate funding to use for automakers rather than seeking an additional 25 billion dollars from the TARP [Troubled Asset Relief Programme] programe," she said in a statement, referring to the bailout.

The comments come as Democrats in the US congress are preparing to press Republicans to pass a bill granting separate funds to rescue the ailing industry.

'Big Three' concern 

Perino, although stressing that the Bush administration "does not want US automakers to fail", said that providing money from the bailout to other firms apart from financial companies would begin a "slippery slope".

"If automakers receive assistance from the TARP programme, other industries will follow," she said.

"Every dollar taken from the TARP programme for other industries is one dollar less available to deal with the ongoing financial crisis."

The money should instead come from the department of energy programme which was previously approved to develop fuel-efficient vehicles, Perino said.

Many Democrats want to use part of the bailout, approved in September, to help the US car sector, in particular the struggling Big Three automakers: Chrysler,
General Motors and Ford, which employ thousands of people across the US.

Legislation planned

The three have asked for $25bn to prop up their businesses, and Democrats in the US senate plan to introduce on Monday legislation attaching an auto bailout to a separate bill passed by the US House of Representatives extending unemployment benefits.

Barack Obama, the US president-elect, has also said he believes the auto industry needs assistance, but that it should not be unconditional.

"For the auto industry to completely collapse would be a disaster in this kind of environment," he told CBS news on Sunday.

"So my hope is that over the course of the next week, between the White House and congress, the discussions are shaped around providing assistance but making sure that that assistance is conditioned on labour, management, suppliers, lenders, all of the stakeholders coming together with a plan."

The so-called Big Three car markers have been criticised for not adapting swiftly enough to market conditions and developing more fuel efficient cars.

'Dinosaur' industry

Republicans in the US senate say any bid to bail out the auto industry would be a mistake, with Richard Shelby, US senator for the state of Alabama, calling the industry a "dinosaur".

"I don't believe the $25bn they're talking about will make them survive, it's just postponing the inevitable," he told NBC.

Henry Paulson, the US treasury secretary, appears to have ruled out such assistance last week, saying such funds are solely for the financial industry.

A vote on the bill is expected as early as Wednesday.

Source:
Al Jazeera and agencies
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