US auto industry on brink of collapse as EU seals huge recession package

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WASHINGTON, Dec 13 (AFP): The United States mulled urgent new steps to prevent the collapse of its embattled auto sector as the European Union sealed a huge 260-billion-dollar package to fight off the global recession.
As the leaders of Japan, China and South Korea went into talks aimed at weathering the downturn, the White House was considering tapping its 700-billion-dollar financial aid package for the struggling car industry.
"Because Congress failed to act, we will stand ready to prevent an imminent failure," Treasury Department spokeswoman Brooklyn McLaughlin said.
A 14-billion-dollar auto rescue deal passed the House of Representatives this week but failed in the Senate amid opposition from Republicans, who demanded that US plants' wages match those at foreign-owned, non-union plants.
Spokeswoman Dana Perino declined to say when a decision would be made on using the finance industry's troubled asset relief programme (TARP) fund, but said the White House understood "the urgency of the situation."
General Motors, meanwhile, announced it was idling 30 per cent of its North American production "in response to rapidly deteriorating market conditions."
The troubled auto giant said the action comes in response to an industry-wide 26-per cent drop in November vehicle sales and a 41-per cent drop for GM.
Fresh data showed US retail sales slumped 1.8 per cent against tight credit conditions as consumers cut back on their spending in the face of large losses in jobs and wealth.
However, a breakthrough was made in Brussels as EU leaders sealed an agreement for the 260-billion-dollar plan designed to dig the bloc out of recession.
The stimulus plan will see members pump on average the equivalent of 1.5 per cent of gross domestic product into their economies in a bid to spark them back into growth.
"Everybody absolutely agrees on the gravity of the crisis," French President Nicolas Sarkozy said. "Everybody agrees on the need for a stimulus plan."
The deal was struck as Spanish banking giant Santander said it would slash 1,900 jobs at its three British subsidiaries next year to cut costs, a day after US-based Bank of America announced cuts of up to 35,000 jobs worldwide.
In Asia, leaders of China, Japan and South Korea were set for a rare joint summit with the economic crisis at the top of the agenda.
Host Japan said it hopes the summit will study expanding the Chiang Mai Initiative, a system of currency swaps set up in 2000 to protect Asia from regional financial turmoil.
The joint summit of the three countries-which together account for three-quarters of Asia's gross domestic product-is their first, other than shorter three-way meetings on the sidelines of international meetings.
Japanese Prime Minister Taro Aso hosts South Korean President Lee Myung-Bak and Chinese Premier Wen Jiabao in the southwestern Japanese prefecture of Fukuoka, where Aso's wealthy family comes from.
On the eve of the summit, South Korea announced an increase totalling almost 45 billion dollars in its currency swaps with China and Japan as it looked to protect its won currency from massive selling pressure in the global crisis.
Also Friday, Japan's Aso announced a new 23 trillion yen (255 billion dollars) injection that will take government revival efforts to more than 550 billion dollars since October.
"This is a great global recession which comes once in 100 years," Aso said. "But by taking appropriate measures without any delay, we can minimise the impact."
Stock markets in Europe and Asia fell hard Friday as the US auto deal failed, while Wall Street took heart from the White House's promise not to let the sector fold.
The dollar also tumbled below the key 90 yen level for the first time since 1995 following the auto talks' collapse.