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Automakers Ask for Bailout to Keep Wheels Turning


Industry sinking in worst market in 25 years.

The auto industry wants to back a truck up to the US Treasury and drive away with $50 billion.

General Motors (GM), Ford (F) and Chrysler say they need the money to get them through the worst auto market in about 25 years.

But the money wouldn't necessarily be used to develop the next generation of fuel-efficient or electric cars. Legacy costs are killing the US auto industry and the automakers say they need about $25 billion for healthcare costs. The balance would be used for general liquidity and could be delivered in different ways, including short-term borrowing from the Federal Reserve.

In return, the automakers would grant stock warrants, Bloomberg reports.

In September, Congress approved a $25 billion loan program to help the automakers build fuel efficient vehicles. Buyers are shunning gas-guzzlers in the economic downturn and Detroit was stuck with production geared to SUVs and pickup trucks.

The 3 automakers reported combined first-half losses of $28.6 billion. In October, new vehicles sold at a seasonally adjusted annual rate of 10.6 million, the lowest since 1983.

The argument for the bailout is familiar: It'll saving jobs and a good chunk of the nation's manufacturing industry. It's hard to imagine Congress refusing, especially now that Democrats have extended their majorities in both houses.

Previously, Congress approved a $700 billion package for the financial industry. It seems to be working well, even if some executives at American International Group (AIG) spend some of the money on fancy trips.

The United Autoworkers Union says it supports the $25 billion for its members' healthcare costs. The automakers continue to struggle to support UAW-run trusts that were set up to cover retirees' medical care.

On Thursday, GM CEO Rick Wagoner, Ford top dog Alan Mulally, Chrysler's Robert Nardelli and UAW President Ronald Gettelfinger met with elected officials to push the deal.

Speaker of the House Nancy Pelosi, D-California, says the government wants to ensure the "viability" of the auto industry while "looking out for taxpayers."

President-elect Barack Obama says he plans to work with the auto industry to make it more competitive. Obama has said the nation needs a $175 billion stimulus package to follow the $168 billion package President Bush signed into law in February.
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