Conditional auto aid

Our view: GM needs financial help, but change must be tied to U.S. assistance

November 18, 2008

Americans are sharply divided over whether General Motors Corp. should be rescued from potential bankruptcy with a $25 billion federal loan. GM executives, United Auto Workers officials and industry allies insist that without the government aid, many American workers could lose their jobs and hundreds of thousands of retirees may be left with diminished pensions and health benefits. Government aid with significant strings should hasten the best possible outcome - a leaner, more competitive GM. Congress must supply the needed financial assistance with a vote this week. Without that help, GM's deepening struggle would likely prolong a serious global recession. If the financial troubles of Chrysler and Ford worsen, a collapse of America's big three automakers could result in the loss of 3 million jobs within a year, a recent study by the Center for Automotive Research predicts.

Congress should name an experienced, respected executive to monitor GM's performance, and GM's leaders should move quickly to reshape the company. If they falter or courts interfere, federal aid should end.

Some of the steps that GM should take are obvious, such as reducing their brands to increase efficiency and cut costs. Health benefits for retirees, to be financed from an $80 billion trust fund established by the company and run by the UAW, also should be pared back.

President-elect Barack Obama said this week that he favored giving GM government aid but cautioned that it should be supplied as part of a long-term plan for a "sustainable U.S. auto industry" - not simply as a blank check. And he's right about that.

The Bush administration favors providing immediate aid to GM through the $25 billion already appropriated to help America's big three automakers to retool and produce a new generation of fuel-efficient cars. But congressional Democrats have rejected that proposal, saying the aid should come from the $700 billion economic rescue package set up for financial institutions. That squabble should be quickly settled and immediate aid for GM approved, with significant conditions attached, to assure the public that necessary change will come.

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