Bailout leaves much to Obama

Carmakers' future is put in his hands

WASHINGTON -- In reluctantly tossing a $17.4 billion government lifeline to General Motors and Chrysler on Friday, President George W. Bush assured that the automakers would not fail in coming weeks -- sparing both the economy and his own legacy another potentially devastating blow. But Bush's action leaves most of the tough decisions about the U.S. auto industry's future to President-elect Barack Obama.

The conditions Bush attached to the emergency loans, such as requiring unions to accept wages and benefits comparable to those at U.S. factories run by foreign automakers, were largely nonbinding and thus subject to change by the next president.

That could mean a far different future for American automakers from what many analysts have been predicting.

Obama consistently has echoed Bush's call for major restructuring by U.S. automakers to assure their long-term viability in a changing global marketplace.

With his strong environmental and pro-labor stances, however, Obama might have a much different view of what constitutes viability than his predecessor. For example, in his energy plan, Obama has called not just for keeping Detroit alive but for making it a world leader in fuel-efficient, environmentally friendly vehicles.

"This is clearly a temporary measure," Mark Oline, an analyst with the credit rating enterprise Fitch Ratings, said of the bailout. "We expect the agreement will be significantly reworked once the new Congress and the new administration take office."

Detroit automakers have begun shifting production from gas-guzzling trucks to smaller, fuel-efficient cars and investing in technology to produce hybrid and electric cars. But those changes have been slow in coming, and the recession and credit crunch hammered Detroit's already financially weakened Big Three.

GM and Chrysler have said they needed a total of $14 billion by March 31, or they could face bankruptcy. Ford said it does not need short-term funding but warned that a failure by one or both competitors could endanger it as well.

In an indication of what might lie ahead, the United Auto Workers union and some Democratic lawmakers were calling on Obama on Friday to change some conditions.

Obama called the bailout a "necessary step" and warned GM and Chrysler executives not to squander the chance to remake their companies. "The American people's patience is running out," he said.

But Obama, speaking at a news conference in which he stressed the importance of increasing wages throughout the economy, said workers shouldn't be the only auto industry stakeholders asked to take "painful steps."

"I just want to make sure that when we see a final restructuring package, that it's not just workers who are bearing the brunt of that restructuring," Obama said.

Bush's announcement Friday morning ended a monthlong drama that saw the chief executives of Detroit's Big Three trek to Washington twice to ask Congress for emergency loans for their companies and the approximately 3 million people whose jobs directly or indirectly rely on them -- only to be rebuffed.

"There is too great a risk that bankruptcy now would lead to a disorderly collapse of the auto companies," Bush said. "My economic advisers believe that would deal an unacceptably painful blow to hardworking Americans far beyond the auto industry ... and send our suffering economy into a deeper and longer recession."

GM Chief Executive Richard Wagoner and other GM executives provided few new details of how they would restructure their company beyond the plan they submitted to Congress this month. That plan included eliminating or selling GM's Saab and Saturn brands, shrinking the Pontiac division, laying off thousands of workers and cutting its sales network by about 2,000 dealers.

"We know we have a lot of work in front of us to accomplish this plan," Wagoner said at a news conference in Detroit on Friday. "We look forward to proving what American ingenuity can achieve."

GM stock shot up 23 percent Friday to $4.49. Chrysler is privately held. Its chief executive, Robert Nardelli, said the company was committed to meeting the bailout requirements.