US car unions threaten to put brakes on $17bn bailout over 'unfair conditions'

Published on Saturday 20 December 2008 14:28

CAR-MAKING unions in the United States are threatening to derail the industry's emergency bailout this week as they seek to reverse "unfair conditions" imposed on workers.

US President George Bush has offered $17.4bn (11.7bn) in loans to its big three car makers, General Motors, Chrysler and Ford, which are reeling from a slump in consumer demand. GM and Chrysler are both facing imminent bankruptcy, which could create economic chaos and throw millions out of work across the country.

GM has asked the government for $4bn for December and another $4bn for January, while Chrysler has asked for $7bn until the end of March.

But the United Auto Workers union said it would try to reverse "unfair conditions" imposed on workers in the bailout, saying they had already made sharp concessions.

"We will work with the Obama administration and the new Congress to ensure that these unfair conditions are removed as we join in the coming months with all stakeholders to create a viable future for the US auto industry," said UAW president Ron Gettelfinger.

In Argentina, workers at a GM plant in western Santa Fe blocked access to the premises to protest against more than 100 planned layoffs, after contract negotiations broke down and were postponed by a government mediator until after Christmas. Instead of layoffs, union leaders are asking for the plant's reduced work schedule to be absorbed equally by the plant's 2,000 workers.

Officials said the loans would be managed by the US Treasury and that no "car tsar" would be appointed, but that President-elect Barack Obama would be allowed to designate one after taking office on January 20. Obama called the loans "a necessary step to help avoid a collapse in our auto industry that would have devastating consequences for our economy and our workers".

The funds will come from the Treasury's $700bn Troubled Asset Relief Program (Tarp) approved in October to bail out financial institutions.

The companies have to provide warrants for non-voting stock, accept limits on executive pay and perks and give priority to the government loans over other debts, to the extent permitted by law.

The car makers will have to take steps to demonstrate their viability by March 31 or the government could require the funds to be repaid.

Meanwhile, Lord Mandelson is facing increasing pressure to deliver an immediate short-term bailout of the British car sector. Expectations are that the Business Secretary will offer a cash lifeline to Jaguar as early as this weekend, worth hundreds of millions of pounds, in order to protect the company's high-tech research base in the UK.

Mandelson has said the Government is looking at whether the car industry should be given support but ruled out sweeping bailouts across the economy. New car registrations in Britain plunged 36.8% on the year in November, the steepest fall in nearly three decades.