White House: Letting auto industry fail would be 'irresponsible'

With its bailout prospects defeated in the Senate, the American auto industry and its dependents were looking Friday toward the White House for salvation.

"For God's sakes, I hope the president acts," Mayor Virg Bernero of Lansing, Mich., said Friday morning.

For its part, the White House released a statement that allowing the U.S. car industry to go down the drain "would be irresponsible."

The Senate on Thursday night failed to compromise on a $14 billion bailout for General Motors and Chrysler, after Republicans objected to a House bill passed Wednesday with White House backing.

"It's over with," Senate Majority Leader Harry Reid said on the Senate floor.

General Motors GM and Chrysler have said they don't have enough money to get through the end of the year. Ford F has asked for no immediate money but says bankruptcy by the others could pull it down.

If all three were to go under, up to 2.6 million jobs — about 1.9% of the U.S. workforce — could be lost, estimates Moody's Economy.com chief economist Mark Zandi. That includes more than 255,000 people directly tied to the three companies and an additional 2.3 million whose jobs are indirectly dependent, from people who work in the steel, glass, fabric, tire and electronics industries.

After hours of closed-doors talks, which separately included company, creditor and worker representatives, the impasse came when the United Auto Workers would not agree to align their labor costs with those of workers foreign-owned U.S. plants by the end of 2009, said Senate Republican leader Mitch McConnell and others.

"We were about three words away from a deal," said Sen. Bob Corker, R-Tenn., the lead negotiator for Republicans. The question now: What next?

A GM official wasn't ready to give up hope. "We'll see what (Friday) brings," said spokesman Greg Martin. "Let's wait and see."

GM and Chrysler have said they needed at least $4 billion each by the end of the year to stay afloat and have maintained bankruptcy filing to restructure is not a viable option. Both have said they fear filing would cause their sales to dry up instantly on shoppers' fears over warranties and parts.

Treasury Secretary Henry Paulson could provide aid from the $700 billion financial rescue program, but he has said that money must be reserved to protect the financial system.

White House spokeswoman Dana Perino said Thursday that doing nothing could mean the end of U.S. automakers. "If we don't act, we could wake up and not have any domestic auto industry."

GM and Chrysler could conserve cash by shutting down operations between now and Jan. 20 — in hopes of quick aid when President-elect Obama is inaugurated and a new Congress is in place. Obama supports help for the industry with conditions. GM has already said it's shutting down for two weeks over Christmas.

"It behooves them to hang on, if they can," said Aaron Bragman, an analyst for IHS Global Insight. "You do that by basically shutting everything down and trying to take out as much costs as possible."

Shutting down would be a high-stakes risk: The automakers would have no revenue during that time even if cars sell, because they book revenue when vehicles are shipped to dealers.

Shutting operations that long also could devastate suppliers. Because they supply domestic and foreign-owned plants, the impact would ripple through the industry. "It could take out the supply base," said David Cole, chairman of the Center for Automotive Research. "It's the ultimate in idiocy."

Silke Carty reported from Detroit. Contributing: The Associated Press