THE WHITE House said this week that the financing arms of leading carmakers might be eligible for government assistance as talks continued on a possible merger between General Motors (GM) and Chrysler.
Underscoring the urgency facing big US carmakers, GM said it might have to delay or cancel several new models as part of a drive to cut costs.
"It's clear that the carmakers are dealing with a very serious situation," said Dana Perino at the White House. "It's possible that some of those financing arms could be a part of the rescue package, the Tarp ."
Although the Bush administration is not expected to open up the recapitalisation plan it devised for the US banking system to carmakers, government money could be used to buy up troubled loans, helping the flow of credit in the industry. The energy department is also likely to speed up the delivery of €20 billion in low-cost loans recently approved by Congress.
The Treasury department has in the past week come under mounting pressure to expand its bank recapitalisation programme. But Treasury officials have signalled that they would tread very carefully when dealing with requests. "One thing that's very important is that we rely heavily on the federal regulators to give us an indication of how strong the institutions are and how much capital they need. Other industries don't have that benefit," David Nason, a senior Treasury official, told CNBC. Meanwhile, the depth of the troubles was highlighted by GM's product review. "We're evaluating all our product programmes," the carmaker said on Monday. "Things are changing and evolving every day."
The review, as well as the prospect of GM's taking over Chrysler, its smaller Detroit-based rival, have sent shockwaves through the global car parts industry.
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