US congress refuses loan to troubled car sector

THE US Congress could not approve a new emergency loan to the country's troubled car sector, Democratic leaders said yesterday, after two days of hearings on Capitol Hill in which industry leaders' plea for aid appeared to backfire.

News of the impasse over one of the hardest-hit sectors of the US economy came as President George W. Bush agreed to extend unemployment benefits after US weekly jobless claims hit a 16-year high.

At a news conference, Harry Reid, Senate majority leader, and Nancy Pelosi, speaker of the House of Representatives, said there were not sufficient votes to pass a $25 billion (€20 billion) loan for Detroit that Democrats had previously advocated and that the car companies had to be more specific about their plans to restructure.

They gave the big three carmakers - General Motors, Ford and Chrysler - until December 2nd to submit a "viable" recovery plan to Congress, with the prospect of convening another set of hearings on such a plan immediately afterwards and possible congressional votes a week after that.

"The sad reality is that no one has come up with a plan that can pass the House and the Senate and get signed by President Bush," said Mr Reid.

"The executives of the auto companies have not been able to convince the Congress or the American people that this government bailout will be its last."

Ms Pelosi called on the industry to provide "a plan for viability on how they go into the future . . . Until they show us the plan, we cannot show them the money."

Their announcement came despite a last-minute bid by four Democratic and Republican senators from car-producing states to build up support for a bridging loan. Mr Reid said that the car companies' case had been damaged by the executives' decision to fly by corporate jet to the hearings.

"Inaction is simply not an option," Ron Gettelfinger, head of the United Auto Workers union, said earlier yesterday.

"Without immediate assistance, we could see, and I stress could see, a collapse of one or more of the domestic auto companies by the end of this year. The costs that would flow from this are simply too great."

The Democrats had originally hoped to agree a $25 billion emergency loan for the industry - funded from a $700 billion financial rescue plan agreed last month - as part of a broader economic recovery package including stimulus measures.