Page last updated at 03:38 GMT, Thursday, 11 December 2008

US House backs car industry plan

Chrysler vehicles for sale
Any deal would still have to be passed by Congress

The US House of Representatives has approved a $14bn (9.4bn) bail-out of the US car industry.

The vote came after the White House and leading Democrats reached broad agreement on the rescue package.

The bail-out could be delayed as it faces stiff opposition from Republicans in the Senate, where the Democrats have a razor-thin majority.

General Motors and Chrysler say they risk ruin without immediate aid. Ford says it may need funds in the future.

The legislation would provide loans to car makers to keep them in business over the coming months.

It would also see the appointment of a "car tsar", named by President George W Bush, to oversee the money, and with the power to force the automakers into bankruptcy if they did not restructure their businesses to become viable.

The government is also expected to take non-voting shares in General Motors, Ford and Chrysler.

The "Big Three" automakers have until 31 March to submit plans to the "car tsar" detailing how they intend to restructure to ensure their longer-term survival, the Associated Press news agency said.

The three firms had called for $34bn between them when their bosses recently went before Congress to put their case.

'Weak bill'

Democratic House Speaker Nancy Pelosi said the measures would act as "a jumpstart for an industry and our country's economic health".

"It is a test," she said after the House passed the bill by 237-170. "And we will soon see in a matter of weeks if the executive suites in Detroit are willing to make the choices" offered by the bail-out package.

From left, GM's Richard Wagoner, Chrysler's Robert Nardelli, and Ford's Alan Mulally
The bosses of Ford, GM and Chrysler had been seeking more money

White House spokeswoman Dana Perino said: "We believe the legislation developed in recent days is an effective and responsible approach to deal with troubled automakers and ensure the necessary restructuring occurs."

Senate Republicans have promised to oppose the bill.

"People realise that this bill is an incredibly weak bill [and] is the product of an administration that wants to kick the can down the road and let somebody else deal with it," said Tennessee Senator Bob Corker.

Republicans are said to prefer a plan that would demand concessions from auto-workers, encourage the car firms to declare bankruptcy and provide a system of government insurance that would protect private investment in the firms.

This follows criticism that the $700bn bail-out of the financial sector was insufficiently detailed.


GM, Ford and Chrysler have all seen sales fall sharply this year in their home market.

While this decline reflects an industry-wide fall that has also hit European and Japanese carmakers in the US, the Big Three have also been criticised for not offering an attractive range of vehicles.

They have been said to be too slow in responding to the growing popularity of smaller, more fuel-efficient vehicles.

GM admitted on Monday that it had "disappointed" American consumers by letting "our quality fall below industry standards and our designs became lacklustre".

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CNN Global stocks slump as rescue talks fail - 43 mins ago
Boston GlobeBailout dead, automakers in search of a lifeline - 1 hr ago
Washington PostTreasury sees TARP funds for financial sector - 1 hr ago
Ananova US car industry rescue plan fails - 3 hrs ago
Reuters SCENARIOS: Where Washington stands on auto bailout - 4 hrs ago
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