U.S. should not aim to save carmakers: McCain adviser
DETROIT (Reuters) - The U.S. government can assist automakers but cannot save them and any aid should be limited so taxpayers do not become ensnared in a long-term investment in the embattled industry, an economic adviser to Republican presidential candidate John McCain said on Monday.
"I don't think the government can rescue the industry," Carly Fiorina, former chief executive of Hewlett-Packard Corp, told Reuters at an event in suburban Detroit.
"Whatever the government does, it should not take away the fundamentals of risk-taking. Sometimes it leads to rewards and sometimes consequences, downside," she said. "In other words, the auto industry cannot be saved from its own bad bets."
Fiorina also said it remained an open question whether the U.S. auto industry needed aid beyond the $25 billion of low-interest loans already approved by the Bush administration and said any additional aid "depends on the particulars of the circumstance."
Her remarks came as a source told Reuters the U.S. Treasury Department was considering aid of at least $5 billion to facilitate a merger between General Motors Corp and Chrysler, through direct capital or purchases of auto loans.
The U.S. auto industry is struggling with a long-term decline as sales in the United States have slumped to two-decade lows and the economic slowdown that pressured North America has spread to Europe and other regions.
"One of the things I think will happen is that the government will expect taxpayers to be repaid, at a minimum in a neutral way and potentially in a profitable way," Fiorina said.
The government, now as an investor, will "have the requirement to understand how those investments are being used to protect taxpayers," she said.
On Sunday, McCain said in an interview on NBC's "Meet the Press" that his preference would be for the auto industry to use the recently authorized $25 billion in low-interest loans that target retooling of plants first.
The sharp downturn in auto sales this year has left analysts questioning whether GM, Chrysler and rival Ford Motor Co have the liquidity to withstand the slump and complete restructuring plans.
The slump has set off fierce lobbying on behalf of the auto industry ahead of the U.S. presidential election, with supporters arguing that a bankruptcy of an automaker would have a cascading impact across the country.
David Cole, chairman of the Center for Automotive Research, estimated that a failure of GM or Ford could threaten up to 2 million jobs including suppliers and dealers.
(Reporting by Soyoung Kim, writing by David Bailey, editing by Matthew Lewis)
