[Weekly Compilation of Presidential Documents Volume 44, Number 51 (Monday, December 29, 2008)]
[Pages 1577-1578]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
The President's Radio Address

December 20, 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 government's proper role. 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 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 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 path is to 
allow the auto companies to reorganize through chapter 11 provisions of 
our bankruptcy laws and provide a Federal loan to keep them operating 
while they try to restructure. But given the current state of the auto 
industry, my economic advisers believe that bankruptcy could now lead to 
its disorderly collapse, sending our economy into a deeper and longer 
recession.
    A more responsible option is to give auto companies an incentive to 
restructure outside of bankruptcy, and a brief window in which to do it. 
My administration proposed legislation to achieve this, but Congress was 
unable to get a bill to my desk before adjourning for the year. This 
means the only way to stave off a collapse of the auto industry is for 
the executive branch to step in. So, yesterday I announced that the 
Federal Government will grant loans to auto companies, which will 
provide help to them in two ways.
    First, the loans 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.
    The terms of the loans will require the auto companies to 
demonstrate how 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. If a company 
fails to come up with a viable plan by March 31st, it will be required 
to repay its Federal loans. Taken together, these conditions send a 
clear message to everyone involved in 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 taking represent a step that we all wish were not 
necessary. But given the situation, it is the most effective and 
responsible way to address this challenge

[[Page 1578]]

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 that they can meet challenges with ingenuity 
and determination and emerge stronger than before.
    Thank you for listening.

Note: The address was recorded at 12 p.m. on December 19 in the Cabinet 
Room at the White House for broadcast at 10:06 a.m. on December 20. The 
transcript was made available by the Office of the Press Secretary on 
December 19 but was embargoed for release until the broadcast. The 
Office of the Press Secretary also released a Spanish language 
transcript of this address.