    [Public Papers of the Presidents of the United States: George W. Bush (2008, Book II)]
    [December 19, 2008]
    [Pages 1499-1501]
    [From the U.S. Government Publishing Office www.gpo.gov]

    Remarks on the United States Auto Industry
    December 19, 2008

        Good morning. For years, America's automakers have faced serious
    challenges: burdensome costs, a shrinking share of the market, and
    declining profits. In recent months, the global financial crisis has
    made these challenges even more severe. Now some U.S. auto executives
    say that their companies are nearing collapse and that the only way they
    can buy time to restructure is with help from the Federal Government.
        This is a difficult situation that involves fundamental questions
    about the proper role of Government. On the one hand, Government has a
    responsibility not to undermine the private enterprise system. On the
    other hand, Government has a responsibility to safeguard the broader
    health and stability of our economy.
        Addressing the challenges in the auto industry requires us to
    balance these two responsibilities. If we were to allow the free

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    market to take its course now, it would almost certainly lead to
    disorderly bankruptcy and liquidation for the automakers. Under ordinary
    economic circumstances, I would say this is the price that failed
    companies must pay, and I would not favor intervening to prevent the
    automakers from going out of business.
        But these are not ordinary circumstances. In the midst of a
    financial crisis and a recession, allowing the U.S. auto industry to
    collapse is not a responsible course of action. The question is how we
    can best give it a chance to succeed. Some argue the wisest pass--wisest
    path is to allow the auto companies to reorganize through chapter 11
    provisions of our bankruptcy laws and provide Federal loans to keep them
    operating while they try to restructure under the supervision of a
    bankruptcy court. But given the current state of the auto industry and
    the economy, chapter 11 is unlikely to work for American automakers at
    this time.
        American consumers understand why: If you hear that a car company is
    suddenly going into bankruptcy, you worry that parts and servicing will
    not be available, and you question the value of your warranty. And with
    consumers hesitant to buy new cars from struggling automakers, it would
    be more difficult for auto companies to recover.
        Additionally, the financial cross--crisis brought the auto companies
    to the brink of bankruptcy much faster than they could have anticipated.
    And they have not made the legal and financial preparations necessary to
    carry out an orderly bankruptcy proceeding that could lead to a
    successful restructuring.
        The convergence of these factors means there is too great a risk
    that bankruptcy now would lead to a disorderly liquidation of American
    auto companies. My economic advisers believe that such a collapse would
    deal an unacceptably painful blow to hard-working Americans far beyond
    the auto industry. It would worsen a weak job market and exacerbate the
    financial crisis. It could send our suffering economy into a deeper and
    longer recession, and it would leave the next President to confront the demise of a major American industry in
    his first days of office.
        A more responsible option is to give the auto companies an incentive
    to restructure outside of bankruptcy and a brief window in which to do
    it. And that is why my administration worked with Congress on a bill to
    provide automakers with loans to stave off bankruptcy while they develop
    plans for viability. This legislation earned bipartisan support from
    majorities in both Houses of Congress.
        Unfortunately, despite extensive debate and agreement that we should
    prevent disorderly bankruptcies in the American auto industry, Congress
    was unable to get a bill to my desk before adjourning this year.
        This means the only way to avoid a collapse of the U.S. auto
    industry is for the executive branch to step in. The American people
    want the auto companies to succeed, and so do I. So today I'm announcing
    that the Federal Government will grant loans to auto companies under
    conditions similar to those Congress considered last week.
        These loans will provide help in two ways. First, they will give
    automakers 3 months to put in place plans to restructure into viable
    companies, which we believe they are capable of doing. Second, if
    restructuring cannot be accomplished outside of bankruptcy, the loans
    will provide time for companies to make the legal and financial
    preparations necessary for an orderly chapter 11 process that offers a
    better prospect of long-term success and gives consumers confidence that
    they can continue to buy American cars.
        Because Congress failed to make funds available for these loans, the
    plan I am announcing today will be drawn from the financial rescue
    package Congress approved earlier this fall. The terms of the loans will
    require auto companies to demonstrate how

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    they would become viable. They must pay back all their loans to the
    Government and show that their firms can earn a profit and achieve a
    positive net worth. This restructuring will require meaningful
    concessions from all involved in the auto industry: management, labor
    unions, creditors, bondholders, dealers, and suppliers.
        In particular, automakers must meet conditions that experts agree
    are necessary for long-term viability, including putting their
    retirement plans on a sustainable footing, persuading bondholders to
    convert their debt into capital the companies need to address immediate
    financial shortfalls, and making their compensation competitive with
    foreign automakers who have major operations in the United States. If a
    company fails to come up with a viable plan by March 31, it will be
    required to repay its Federal loans.
        The automakers and unions must understand what is at stake and make
    hard decisions necessary to reform. These conditions send a clear
    message to everyone involved in the future of American automakers: The
    time to make the hard decisions to become viable is now, or the only
    option will be bankruptcy.
        The actions I'm announcing today represent a step that we wish were
    not necessary. But given the situation, it is the most effective and
    responsible way to address this challenge facing our Nation. By giving
    the auto companies a chance to restructure, we will shield the American
    people from a harsh economic blow at a vulnerable time. And we will give
    American workers an opportunity to show the world once again they can
    meet challenges with ingenuity and determination and bounce back from
    tough times and emerge stronger than before.
        Thank you.

    Note: The President spoke at 9:01 a.m. in the Roosevelt Room at the
    White House. In his remarks, he referred to President-elect Barack
    Obama. The Office of the Press Secretary also released a Spanish
    language transcript of these remarks.