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Stocks trade near session lows as economic concerns continue to weigh on investor sentiment.

WASHINGTON (AP) -- With Congress returning Monday to deal with an auto industry in dire financial straits, the Bush White House stressed that it supports help, but not at the expense of the $700 billion Wall Street rescue program.

With the Senate ready to start work on assistance to the industry, press secretary Dana Perino issued a statement saying the administration "does not want U.S. automakers to fail." She complained that reporting on the White House's statements on this issue has involved "attempts to shorthand the administration's position."

Perino's early morning statement also made clear, however, that the administration steadfastly opposes drawing funds from the bailout plan to help Detroit. She said the $25 billion that Democrats favor taking from the rescue plan should come, instead, from a Department of Energy program previously approved and funded to develop fuel-efficient vehicles. The White House opposes the idea of automakers getting an additional $25 billion.

Democrats want to use part of the $700 billion Wall Street bailout for emergency loans to help prop up the Big Three carmakers. General Motors Corp., Ford Motor Co. and Chrysler LLC are seeking an infusion of $25 billion, a figure that several Senate Democrats embraced Sunday.

Senate Democrats plan to introduce legislation Monday attaching an auto bailout to a House-passed bill extending unemployment benefits. A vote was expected as early as Wednesday.

"There's a high degree of urgency" for federal action if GM is going to stave off a financial crisis, Rick Wagoner, GM chairman and chief executive, said Sunday in a joint appearance with United Auto Workers President Ron Gettelfinger on WDIV-TV in Detroit.

"It's really time to move on this," Wagoner said.

In her statement Monday, Perino said, "The auto industry is an important part of our manufacturing base, and we want the industry to succeed and compete in the global economy." But she also said that media reports have erroneously depicted the administration as taking too harsh a stand on financial relief.

Her statement Monday seemed aimed more at elaborating on the administration's position than revising or tweaking it.

"We believe this assistance should come from the program created by Congress that was specifically designed to assist the automakers - from the $25 billion Department of Energy loan program," Perino said.

She said the $700 billion rescue program "was never intended by Congress to assist automakers or other sectors of the economy. It was solely intended to deal with what is an ongoing credit crisis in our financial sector." Perino also said that any new legislative effort to help the big carmakers should require that those manufacturers are viable companies, ones willing to restructure themselves for the long term.

President-elect Barack Obama said he believes aid for the auto industry is needed but that it should be provided as part of a long-term plan - not simply as a blank check.

"For the auto industry to completely collapse would be a disaster in this kind of environment," Obama said in a "60 Minutes" interview aired Sunday night on CBS. "So my hope is that over the course of the next week, between the White House and Congress, the discussions are shaped around providing assistance but making sure that that assistance is conditioned on labor, management, suppliers, lenders, all of the stakeholders coming together with a plan - what does a sustainable U.S. auto industry look like?"

House Speaker Nancy Pelosi, D-Calif., has embraced an auto bailout, though she hasn't set a price tag. But passage is less certain in the Senate, where majority Democrats will need at least a dozen GOP votes to prevent opponents from blocking their measure.

On Sunday top Republican senators said using any of the Wall Street bailout money to help carmakers would be a mistake. Sen. Richard Shelby of Alabama called the U.S. auto industry a "dinosaur" whose demise would simply be stalled by a bailout.

"I don't believe the $25 billion they're talking about will make them survive," said Shelby, the senior Republican on the Senate Banking, Housing and Urban Affairs Committee. "It's just postponing the inevitable."

Shelby spoke on NBC's "Meet the Press."

Congressional Democrats have some internal power struggles to settle this week.

The House's longest-serving member, 82-year-old John Dingell of Michigan, is fighting to keep the chairmanship of the powerful Energy and Commerce Committee. And in the Senate, Democrats will have their own showdown Tuesday when they decide whether to strip independent Sen. Joe Lieberman of Connecticut of his chairmanship of the Homeland Security and Governmental Affairs Committee.


source: http://www.ap.org/

World leaders pledged to shore up global growth, avoid protectionism and move quickly on global regulatory reform at the conclusion of the Group of 20 summit in Washington at the weekend.

Presenting a united front in the face of the economic crisis, leaders from both developed and developing nations promised to take “whatever further actions are necessary to stabilise the financial system” and said they would “use fiscal measures to stimulate domestic demand to rapid effect, as appropriate”.

People at the talks said the statement would give fresh momentum to national stimulus packages, in particular in the UK and continental Europe.

Leaders said they would require regulators to set up “colleges of supervisors” to monitor global banks and said ministers would report back by March 31 on issues such as strengthening of the credit derivatives markets, review of financial sector pay schemes, and valuation of complex securities.

European leaders claimed the plan represented a broadly European reform agenda, while the US emphasised the summit commitment to pro-market principles. Both US and non-US officials said the outcome of the process set in train by the summit would depend on what the incoming Obama administration – which takes office on January 20 – decided to do.

The industrialised economies agreed to open up membership of key standards-setting bodies, including the Financial Stability Forum, to emerging economies such as China and India, and promised to increase their say at the International Monetary Fund.

The G20 heads of government – who were meeting for the first time – pledged to meet again by next April.

Robert Zoellick, the president of the World Bank, who warned the world leaders that a drying up of credit could lead to a “huge drop in trade” told the FT the G20 recognised they faced “a global crisis that is going to need a global response”.

The G20 promised not to adopt any new protectionist measures, and pledged a fresh effort to revive the Doha round of trade talks. World leaders also pledged to ensure that developing nations caught up in the crisis have access to dollar finance.

source:www.ft.com

General Motors Corp., hoping to sway the battle in Washington over an auto-industry bailout, has begun telling federal officials that a bankruptcy filing by the car maker would set off a chain reaction hammering hundreds of suppliers and dealers -- and in turn the company's Detroit rivals.

GM is attempting to set the terms for what looks to be a showdown among the lame-duck U.S. Congress, President Bush and the incoming Obama administration. On Friday, Senate Majority Leader Harry Reid signaled he will move forward on Monday with a bill giving the industry access to the $700 billion Troubled Asset Relief Program. That entity, known as TARP, was set up by the government in October to help ailing banks and other financial firms.

The Bush administration and many Senate Republicans oppose giving auto makers access to TARP. Instead, President Bush on Friday urged Congress to speed up the release of $25 billion in already-approved loans to the auto industry. He asked Congress to drop requirements that those loans be used to help the industry retool to meet higher fuel-economy standards, a step many Democrats oppose. The Republicans have enough votes to block a deal in the Senate.

Amid the political horse trading, GM is holding meetings this weekend with U.S. Congressional leaders, the Bush White House and members of the Obama transition team, according to people familiar with the situation. The efforts are an attempt to show policy makers how a GM bankruptcy filing would unleash unintended consequences that could cripple the country's industrial base.

GM's board is composed of several people considered influential in Washington circles, and some of them are pitching in on the lobbying effort, say people familiar with the process. Among these directors are Erskine Bowles, Bill Clinton's former chief of staff; Phil Laskawy, recently named as the non-executive chairman of Fannie May; John Bryant, a key Obama fundraiser; and Armando Codina, who is a close personal friend of President Bush. Through a spokesman, Mr. Codina declined comment. The other directors could not be reached.

Warning of systemic risk may seem like a self-serving step for a company seeking a government bailout. But GM's new lobbying nonetheless raises the political stakes for Congress and president-elect Barack Obama.

A bailout would be a boon both to the companies and, by saving jobs, to organized labor, a major supporter of Mr. Obama in the election. Auto-related industries employ 3.1 million people around the country, encompassing everything from car-seat makers to auto dealers to auto-parts stores. GM itself employs 123,000 in North America and does business with thousands of North America suppliers.

Part of GM's premise is that a bankruptcy would threaten both jobs and the health of the government's pension-benefit insurance arm, which covers millions of workers not in the auto industry. A GM bankruptcy would swamp the fund, the argument goes, placing another burden on the strained federal budget.

"There is no Plan B being discussed beyond a government bailout," said one top GM adviser said Friday. Another person close to GM said executives recently told GM's board they are "increasingly optimistic" that GM will receive a liquidity injection before the end of the month.

To whip up support for a bailout, GM has been sending letters to tens of thousands of dealers, supplier executives, employees and union members. The letters have encouraged them to call and write Congress, and to contact local media with various "talking points" about the effects of a GM bankruptcy.

Advocates of a bailout point to the complexity and impact of a GM bankruptcy. But New York University business professor Edward Altman, a long-time analyst of corporate bankruptcies, says the federal government should only put money into GM through a pre-planned bankruptcy process that knocks out GM shareholders, rolls bondholders into equity and renegotiates union labor contracts.

Mr. Altman recommends the government provide financing to help GM only after it files for protection from creditors.

"I do not think putting more money into the failed business strategy there makes sense," said Mr. Altman. "The government should help, but it should use bankruptcy as part of the more-efficient process that also limits exposure to taxpayers." Such an approach, says Mr. Altman, would also avoid risk to the broader industry, because GM could use the process to keep paying its most critical vendors.

A GM bankruptcy could create a cascading set of bankruptcies among these part suppliers, other auto makers and suppliers. That's because a bankrupt company could take months, if ever, to pay its pre-bankruptcy bills. Such delays would put stress on suppliers that already run on thin working capital and that feed just a few end auto makers, they argue.

This spillover would most directly hit Chrysler and Ford, who have greater GM overlaps. GM officials are telling lawmakers that the failures at the parts makers would bring them down, too.

The failures could also hit Asian car makers like Toyota and Honda, say automotive experts, who estimate 20% to 25% of suppliers are shared by those two auto makers and Detroit's Big Three.

In all, as many as 5,000 parts suppliers dot North America, with combined annual sales around $150 billion to $200 billion, according to Craig Fitzgerald, a partner at accounting firm Plante & Moran, which advises parts makers.

In addition, the parts business has three times as many workers as the auto makers. There were approximately 489,500 auto-parts production workers at the end of last year, a figure which fell to 415,700 at the end of September, according to the Department of Labor. There were approximately 151,000 auto-assembly workers in the U.S. at the start of 2008, a number that slid to 127,300 at the end of September.

Beyond suppliers, a collapse at GM also carries a risk to thousands of auto dealerships and to the government's pension-benefit insurance arm.

On average, auto dealerships employ 7.3% of a typical state's payroll, and 740,000 dealership jobs nationwide come from the Big Three makers. GM's 6,000-plus dealers employ about 325,000 of those people, according to estimates from the National Automotive Dealer Association.

One of the biggest fears in Washington is how a bankruptcy filing by one or all of the auto makers would affect the federal agency that insures the retirement savings of almost 44 million Americans. The Pension Benefit Guaranty Corp. ended 2007 with a $14 billion deficit, though that shortfall was expected to shrink to about $11 billion. Were GM to place its pension burden on PBGC, it would more than double the agency's current shortfall.

"GM has not been able to give us a straight answer about the funded status of their pension plan," said PBGC Director Charles Millard. "We can't successfully monitor the situation if they are not responsive."

Detroit's pension funds have also been hit hard as stocks -- in which they are heavily invested -- have declined. GM's own pension fund has enough money to meet obligations now, but a Deutsche Bank report estimates that given the market's recent performance, it could be under-funded by $18 billion at the end of 2008.


source: online.wsj.com

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