White House vows auto aid

WASHINGTON - With Congress gridlocked and the economy floundering, the Bush administration declared yesterday that it would step in to prevent the "precipitous collapse" of the U.S. auto industry and the disastrous loss of hundreds of thousands of jobs sure to follow.

A day after the demise of rescue legislation in Congress, carmakers were talking with the administration and the Federal Reserve about how they could still get the billions of dollars they say they need to survive. The talks included conditions that automakers would have to meet, GM spokesman Greg Martin said.

The administration said no decisions had been made on the size or duration of the bailout plan or on what concessions might be demanded from the struggling automakers, their workers, stockholders or others.

In a reversal, the most likely rescue option under consideration involved billions of dollars originally ticketed for the bailout of the financial industry. President Bush had earlier declared that money off-limits to the beleaguered automakers.

General Motors Corp. and Chrysler L.L.C. have warned they are running out of cash and face bankruptcy without assistance. Ford Motor Co., which is in somewhat better shape financially, has been seeking access to a line of credit.

Underlining its difficulties, GM announced yesterday that it would cut 250,000 additional vehicles from its first-quarter production schedule - a third of its normal output - by temporarily closing 21 factories across North America. The move affects most plants in the United States, Canada and Mexico. Many will be shut the entire month of January.

Urgent requests for White House intervention to save the automakers came from President-elect Barack Obama, Republican and Democratic members of Congress, and outside groups.

"Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms," White House press secretary Dana Perino said after the failure of a $14 billion bailout bill in Congress. The legislation died when Senate Republicans demanded upfront pay and benefit concessions from the United Auto Workers that union officials rejected.

Perino added: "Given the current weakened state of the U.S. economy, we will consider other options if necessary, including use of the TARP program to prevent a collapse of troubled automakers. A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time."

TARP is the $700 billion Troubled Assets Recovery Program, the financial-industry bailout plan enacted in October. All but $15 billion of the first $350 billion has been dedicated to troubled banks or insurance companies, and the Treasury Department is barred from dipping into the second $350 billion without a formal notification of Congress.

No decision has been reached about such a notification, administration officials said. If one is made, Congress could then vote to prevent the action, but it would be unlikely to prevail in a showdown with the president.

Obama, who will inherit the problem next month even if bailout billions are handed over in the meantime, said: "My hope is that the administration and the Congress will still find a way to give the industry the temporary assistance it needs while demanding the long-term restructuring that is absolutely required."

In a letter to Bush, House Speaker Nancy Pelosi (D., Calif.) urged the president to demand "the same tough accountability" and taxpayer protections from the automakers as was contained in legislation that cleared the House at midweek.

Michigan Rep. Thaddeus McCotter, a conservative Republican from a state where Ford, GM and Chrysler are based, said: "With the legislative opportunities now exhausted, I urge the president of the United States to immediately release Wall Street TARP funds to the domestic automakers to avoid their impending bankruptcy and its consequent devastation of working families and the depression of our American economy."

It was unclear what role was left to lawmakers after a week in which prospects for industry relief seemed to change by the hour.

A week ago, the government reported the loss of 533,000 jobs in November, the worst monthly showing in more than 30 years.

Since then, the White House and congressional Democrats agreed on a $14 billion measure that would have extended short-term financing to the industry while establishing a powerful new "car czar" to make sure the money was used to turn the Big Three into competitive companies. That bill passed the House on Wednesday but immediately ran into opposition from Senate Republicans who said it did not go far enough.

On Thursday, they demanded the United Auto Workers union agree to accept a lower pay and benefits package that would be in line with compensation earned by workers at U.S. factories producing cars for Japanese companies.

In unprecedented negotiations, lawmakers met with representatives of industry and labor in the Capitol in hopes of striking a deal - the effort that ultimately collapsed when the UAW balked at the terms demanded.

At a news conference yesterday, UAW president Ron Gettelfinger accused GOP senators who blocked emergency loans of trying to "pierce the heart" of organized labor.

Republicans said they were trying to protect taxpayers from a bad bill.