Bush Promises Last-Ditch Auto Bailout

With Congress gridlocked and the economy floundering, the Bush administration declared Friday it would step in and prevent the "precipitous collapse" of the U.S. auto industry and the disastrous national economic impact of the hundreds of thousands of job losses sure to follow.

The day after the sudden demise of emergency legislation in Congress, administration officials said no decisions had been made on the size or duration of the new rescue plan, or what type of concessions, if any, would be demanded from the struggling automakers, their workers, stockholders or others.

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

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

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. Most of the first $350 billion installment has already 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.

What remains of the first installment is about $15 billion, reports CBS News' Sharyl Attkisson -- almost exactly what the car companies need to get to the New Year.

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 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 headquartered, 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 an extraordinary 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.

In the days between then and now, 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 such as Honda, Toyota and Nissan. In an unprecedented series of negotiations, lawmakers met with representatives of industry and labor on the first floor of the Capitol in hopes of striking a deal - the effort that ultimately collapsed when the UAW balked at the terms demanded.

Its worth noting that a number of Southern senators opposing the bailout happen to have foreign automakers in their home states-BMW in South Carolina and Honda and Mercedes-Benz in Alabama to name a few. Voting against the bailout helps them protect their constituents, Attkisson reports.

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

"I want to be clear: Labor has made a tremendous amount of sacrifice in the past," Gettelfinger told CBS Evening News anchor Katie Couric. "Are we willing to do more? Yes. We will. But I don't even know what that means until we get the right people at the table"

His union has come under attack by some who say that workers weren't willing to offer enough concessions to aid struggling automakers.

"I believe … Gettelfinger was too unrealistic and too selfish," Peter Morici, a University of Maryland economist, said on CBS'The Early Show.

Sen. Bob Corker, R-Tenn., who played a leading role for Republicans, told reporters at the Capitol that the talks came close to success but failed when the UAW refused to commit to lowering its pay-and-benefits package in 2009 so it would be "at parity" with the Japanese companies.

He also laid blame at the feet of the administration. "I think it being known that the White House at the end of the day would probably blink probably helped keep us from a deal," he said.

Whatever the reason, the effort stalled when Republicans voted en masse against advancing the original House bill to a final vote late Thursday night.

Hourly wages for UAW workers at GM factories are about equal to those paid by Toyota Motor Corp. at its older U.S. factories, according to the companies. GM says the average UAW laborer makes $29.78 per hour, while Toyota says it pays about $30 per hour. But the unionized factories have far higher benefit costs.

Detroit's carmakers employ nearly a quarter-million workers, and more than 730,000 others produce materials and parts for cars. If one of the automakers declared bankruptcy, some estimate as many as 3 million U.S. jobs could be lost next year.

Many congressional Republicans and some economists said the companies would be best to pursue a prearranged bankruptcy that would allow them to restructure quickly. But most Democrats and the carmakers rejected that, arguing it would quickly lead to liquidation because consumers would never buy cars from a bankrupt auto company.