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But wait, the Fed to the rescue!?

Fed Must Speed Aid to Auto Credit Units, Schumer Says (Update2)

By Angela Greiling Keane

Nov. 24 (Bloomberg) -- The Federal Reserve should speed access to the $700 billion bank-bailout fund for automakers’ finance units to help General Motors Corp., Ford Motor Co. and Chrysler LLC boost sales, Senator Charles Schumer said.

Schumer, a New York Democrat and member of the Senate Banking Committee, asked the Fed in a letter today to begin lending to the credit arms while Congress considers whether to approve a rescue plan for the automakers themselves.

“It is critical that the federal government use the tools at its disposal to deliver immediate assistance,” Schumer said in the letter to Fed Chairman Ben S. Bernanke, Treasury Secretary Henry Paulson and Neel Kashkari, the assistant treasury secretary in charge of the bailout program.

The letter renewed the push for U.S. help by automakers’ allies while Congress is in recess this week. The United Auto Workers union urged members today to press lawmakers for aid, while supplier Dura Automotive Systems Inc. sought to form a caravan of fuel-efficient autos to drive to Washington.

A Treasury spokeswoman, Brookly McLaughlin, didn’t immediately respond to a request for comment on Schumer’s request.

Auto Lenders

Costlier borrowing and tighter credit rules are contributing to the 15 percent slump in U.S. industrywide auto sales through October. GMAC LLC, the lender partly owned by GM, has restricted consumer and dealer financing as it reels from five straight quarterly losses and frozen debt markets.

Ford Motor Credit’s costs to obtain funds for loans have increased, while Chrysler Chief Executive Officer Robert Nardelli has said limited access to credit through Chrysler Financial is the biggest threat to the company and the industry.

U.S. lawmakers postponed until December a vote on whether to give the automakers $25 billion in new federal loans. Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi gave the companies a Dec. 2 deadline to present restructuring plans.

With members of Congress back in their home states and districts, UAW members should lobby for a direct assistance package, the union said today in an e-mail message.

“They need to hear from all of us,” the union said. “It’s crucial to save American jobs, prevent bankruptcy by American auto firms, and create a long-term plan for the viability of our auto industry.”

Fuel-Efficiency Gains

Dura, based in Rochester Hills, Michigan, is leading a plan to have suppliers, dealers and UAW members drive fuel-efficient autos made by U.S. automakers to Washington to show progress in building better vehicles, CEO Timothy Leuliette said.

“We need to move this discussion away from the three CEOs” of the automakers, Leuliette said in an interview today. “We’re talking about America’s jobs.”

Leuliette said he formed a committee to organize the Detroit-to-Washington caravan. Closely held Dura makes parking brakes and seat recliners and emerged from bankruptcy in June.

Senator Bob Corker, a Tennessee Republican, repeated his call for the automakers to take “the painful steps necessary to ensure their viability, which probably include Chapter 11 bankruptcy, reorganization and consolidation.”

Such a restructuring should precede any federal aid to the industry, according to a statement from Corker, who like Schumer serves on the Banking Committee.

To contact the reporter on this story: Angela Greiling Keane in Washington at agreilingkea@bloomberg.net

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