Detroit automakers, teetering on the brink of collapse, are receiving strong signals from the White House that short-term help is on the way while a key senator says the relief package could reach $15 billion for GM and Chrysler.
President George W. Bush said a bankruptcy in the U.S. auto industry would hurt the economy while the U.S. deals with the recession. General Motors Corp. and Chrysler LLC have said they could run out of cash within weeks without support from the government.
"An abrupt bankruptcy for autos could be devastating for the economy," Bush told reporters Monday aboard Air Force One during a surprise trip to Iraq and Afghanistan. He said they were "now in the process of working with the stakeholders on a way forward."
In Detroit, Sen. Carl Levin, D-Mich., said he expects GM to get $8 billion and Chrysler $7 billion from the Bush administration. He said the Treasury secretary likely would be tapped as a "car czar" to oversee restructuring of the companies.
Bush wouldn’t give a precise timetable but said, "This will not be a long process because of the economic fragility of the autos."
Vice President Dick Cheney, in an interview with conservative talk show host Rush Limbaugh, cautioned that "if the automobile industry goes belly up now, there’s a deep concern that that would be a major shock to the system."
The Treasury Department has held discussions with GM and Chrysler and reviewed financial data from the car makers. It said Monday that no decisions had been made on what type of support it may provide to the companies.
The administration, following the defeat of a $14 billion bailout package in the Senate last week, is weighing several options. They include using money from the $700 billion financial bailout fund to provide loans to the carmakers or using money from the fund as collateral for emergency loans the automakers could get from the Federal Reserve. Bush reiterated that tapping the financial bailout fund remains an option.
House Speaker Nancy Pelosi, D-Calif., said the bailout funds were "the only recourse that they have" because of the failure to pass legislation in Congress. She said "something will have to happen imminently" but said requirements for restructuring should be attached to the funds.
"Otherwise, we’re just giving life support, rather than a lifeline for viability into the future," Pelosi said.
White House spokesman Tony Fratto said the administration was considering policy options, and that "when we have something to announce, we’ll announce it. We’ll take the time we have available to get the policy right."
The White House is keeping President-elect Barack Obama and his advisers informed of the discussions. If administration officials choose not to provide the money now, the Obama team could wait for the new Congress, which will have stronger Democratic majorities. But the delay could risk bankruptcy filings by GM and Chrysler.
The White House previously had insisted on limiting use of the Wall Street rescue plan to helping financial institutions. It changed course after the auto bailout bill failed in Congress, citing the consequences to the overall economy if U.S. carmakers failed.
Levin said he expects the Bush administration’s plan to help the Detroit automakers will be similar to the previous deal the White House reached with congressional leaders.
That plan providing loans for GM and Chrysler to help them survive until March 31 was passed by the House last week but blocked by the Senate, mainly by Republican senators, after the United Auto Workers union balked at making upfront wage concessions to take effect sometime next year. Ford Motor Co. has said it has enough cash to survive 2009.