President-elect Barack Obama on Monday urged President Bush to support immediate emergency aid to the beleaguered US auto industry in his first meeting at the White House in Washington.


TV news bulletins last night said it was the first time the incoming president had been in the Oval Office he will occupy from 20 January. Bush indicated at the meeting that he might support some aid and a broader economic stimulus package if Obama and congressional Democrats dropped their opposition to a free-trade agreement with Colombia, a measure for which Bush has long fought, people familiar with the discussion told The New York Times (NYT ).


The paper said the outgoing Bush administration, which has presided over a major intervention in the financial industry, has however baulked at allowing the automakers to tap into the US$700bn bailout fund, despite warnings last week that General Motors might not survive the year.


Obama and congressional Democratic leaders reportedly said the bailout law does authorise the administration to extend assistance.


However, Democrats suggested to the NYT that neither Obama nor congressional leaders were inclined to concede the Colombia pact to Bush and may decide to wait until Obama assumes power in January.


Beginning during the campaign, and confirmed at his first press conference on Friday night, Obama had signalled to automakers and unions that his support for short-term aid now, and long-term assistance once he takes office, is contingent on their willingness to agree to transform their industry to make cleaner, more energy-efficient vehicles. That is also strongly supported by environmental groups in the US.


The New York Times noted that the steadily weakening economy and the prospect of many more job losses, just a week after Obama’s election, and more than two months before he takes office, are testing his effort to remain aloof from the nation’s business on the argument that “we only have one president at a time.”


The paper suggested that how Obama responds to the industry’s dire straits will indicate how much government intervention in the private sector he is willing to tolerate and will also offer hints of how he will approach his job under pressure, testing the limits of his conciliation toward the opposition Republican party and his willingness to stand up to interest groups on his own.


The NYT noted that GM’s shares tumbled on Monday to 1946 prices, closing down 23% to $3.36, as analysts downgraded the stock on worries the automakerwould soon run out of cash and shareholders would be wiped out by any federal bailout.


According to the New York Times, Obama has been far more receptive than Bush to having the government intervene to rescue another major sector of the economy – he called automakers “the backbone of American manufacturing” in his Friday press conference, and many thousands of their employees belong to unions that are part of his Democratic party’s base.


But the paper said Obama’s stance raises the question, with the country in a worsening economic situation, where would the Democrat draw the line as president?


The NYT said Bush has drawn his line at the automakers’ doors, having already been forced to shelve the free market principles of his Republican party to bail out the financial industry over the past two months. But Republicans reportedly have said he would acquiesce in aid to automakers in return for congress’ ratification of the Colombia pact and pending trade agreements with Panama and South Korea.


In other developments on Monday, the Democratic leaders in congress – the speaker of the house, Nancy Pelosi, and the senate majority leader, Harry Reid – declined to call a so-called lame-duck session for next week, as they had hoped, without assurance that Bush would support an economic stimulus package.


As the NYT noted, Obama has already called on the Bush administration to accelerate $25bn in federal loans provided by a recent law specifically to help automakers retool [for more fuel-efficient vehicles] and, late in his campaign, proposed doubling that to $50bn. But industry supporters have told the paper the automakers, squeezed both by the unavailability of credit and depressed sales, need unrestricted cash now, simply to meet payroll and other expenses.


Obama had said on Friday he would instruct his economic team, once in place, to devise a long-range plan to help the auto industry with an emphasis on the environment – reducing emissions and dependence on foreign oil.


But his choice for White House chief of staff, representative Rahm Emanuel, indicated on Sunday that no such deal linking auto-industry aid and a stimulus package with trade pacts was in the cards. “You don’t link those essential needs to some other trade deal,” Emanuel said on ABC’s “This Week”, the NYT noted.


There is reportedly thinking amongst Democrats that Bush bluff would not want to see GM fail in the dying days of his presidency, adding to a negative legacy tarnished by the Iraq war.


Also, economists as conservative as Martin Feldstein, an adviser to a long line of Republican presidents and candidates, have called more broadly for stimulus spending of up to $300 billion.


Detroit’s ‘Big Three ‘ – GM, Ford and Chrysler – are all chewing through their dwindling cash piles at unsustainable rates and recent research suggests their collapse would cost at least 3m jobs while the cost to local, state and federal governments would be as high as $156.4bn over three years in lost taxes and higher benefit outlays.


There have been suggestions that a government bail-out would work out cheaper for taxpayers than simply standing by and letting the automakers go bust.