Obama vows aid for car industry

US President-elect Barack Obama says he will not allow the country's car industry to collapse, but any state help must come with strict conditions.

The industry and its stakeholders would have to restructure, he told NBC television's Meet the Press.

Congress and the White House have been holding talks on a plan to rescue the beleaguered US car industry.

Mr Obama warned the economy would get worse before it improved, but any aid plan needed strong regulations.

He also named Japanese-American General Eric Shinseki as Veterans' Affairs chief.

He said Gen Shinseki was exactly the right person to honour returning soldiers.

The general left his former job as US Army chief of staff after disagreeing with the then Defence Secretary, Donald Rumsfeld, over the number of US troops needed to control Iraq after the invasion.

Financial controls

The country's struggling carmakers have asked for a $34bn (£23bn) rescue plan. Congress and the White House have been holding weekend talks to find a solution.

There had been disagreement over where the money should come from, with Congressional Democrats opposing President George Bush's proposal to modify a $25bn fund which was set up to promote fuel-efficient technologies.

But according to Congressional sources, House Speaker Nancy Pelosi, a Democrat, has suggested that the fund could be used under certain conditions.

The plan is a stop-gap measure intended to help the three firms survive until Mr Obama's administration takes over in January and can craft a longer-term solution, correspondents say.

In the NBC interview, Mr Obama avoided going into detail about the car industry rescue plan, but said letting major carmakers such as General Motors, Ford and Chrysler go bankrupt was not an option.

"That means we're going to have to figure out how to put the pressure in the same way a bankruptcy court would... but do so in a way that allows them to keep their factory doors open," he said.

The 2008 winner of the Nobel economics prize Paul Krugman said he doubted the US car sector would survive, but that it was worth supporting it in the short term.

"In the end these companies will probably disappear," the economics professor at Princeton University said.

Mr Obama said he also wanted to see tighter controls on the financial sector as a whole.

"As part of our economic recovery package what you will see coming out of my administration right at the centre is a strong set of financial regulations which banks, ratings agencies, mortgage brokers, a whole bunch of folks (will) start having to be much more accountable and behave much more responsibly."