WASHINGTON - The Bush administration is looking at "orderly" bankruptcy as a possible way to deal with the desperately ailing U.S. auto industry, the White House said yesterday. The news came as carmakers readied more plant closings, and a half million new jobless claims underscored the deteriorating national economy.
With General Motors, Chrysler and the rest of Detroit anxiously awaiting a White House decision on billions of dollars in emergency federal loans, press secretary Dana Perino said it was not simply a choice between government rescue and the disastrous collapse of a major industry.
"There's an orderly way to do bankruptcies that provides for more of a soft landing," she said. "I think that's what we would be talking about."
President Bush, asked about a bailout, said he had not decided what he would do but did not want to leave a mess for President-elect Barack Obama. A White House decision on helping the troubled automakers could come as early as today.
Bush, like Perino, spoke of bankruptcies orchestrated by the federal government as a possible way to go - without committing himself to it.
"Under normal circumstances, no question bankruptcy court is the best way to work through credit and debt and restructuring," he said. "These aren't normal circumstances. That's the problem."
Perino said there were still several possible approaches to assisting the automakers, including short-term loans from the Treasury Department's $700 billion Wall Street bailout program.
The Big Three automakers said anew that bankruptcy was not the answer, as did an official of the United Auto Workers who called the idea unworkable and dangerous. GM said a report that it and Chrysler had restarted talks to combine was untrue.
House Speaker Nancy Pelosi said on Capitol Hill that grim new unemployment data heightened the urgency for the administration "to prevent the imminent insolvency of the domestic auto industry."
The California Democrat said Bush has the legal authority to act now and should attach the accountability standards that were included in a $14 billion House-passed and Bush-supported carmaker bailout that died in the Senate last week. That plan would have given the government, through a Bush-appointed "car czar," veto power over major business decisions at any auto company that received federal loans.
Congressional aides in both parties suggested that the talk of bankruptcy could be a tactic to extract more hefty concessions from the companies and union in exchange for short-term loans from the Treasury Department's financial industry rescue fund.
Perino said one factor preventing action by the administration is that discussions continue with the various sides that would have to sign on to a managed bankruptcy, such as labor and equity holders in addition to the companies themselves. A senior administration official said the talks between Bush officials and the Big Three and their stakeholders amount to information-gathering, not negotiating.
The White House has emphasized its opposition to "disorderly bankruptcy," presumably a Chapter 7 filing that would effectively shut down a company and require liquidation of assets. That has left on the table the possibility of forcing one or more automakers into a Chapter 11 bankruptcy, which allows a company to keep operating while under a court's purview.
Spokesmen for Chrysler, GM and Ford yesterday referred to their previous comments that bankruptcy was not a workable solution.