The White House and the Treasury gave strong indications Friday that the U.S. government, at least temporarily, would help prop up the American auto industry.
"Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry," Treasury spokeswoman Brookly McLaughlin said.
And White House spokeswoman Dana Perino said the administration is considering using the Wall Street rescue fund to prevent the USA's strapped carmakers from failing.
Perino, speaking aboard Air Force One as President Bush flew to Texas for a commencement speech, said it would be "irresponsible" to further erode the economy by allowing failure in Detroit.
Bush and his top aides discussed the matter Friday after the Senate 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.
President-elect Barack Obama said he was disappointed by the failure of a bailout deal and hoped that the Bush administration and Congress "will still find a way" to help the struggling carmakers.
"The revival of our economy as a whole should not be a partisan issue," Obama said in a statement. "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."
Obama, who takes office on Jan. 20, has said repeatedly that the U.S. auto industry cannot be allowed to collapse but must restructure to remain viable.
In Detroit, United Auto Workers President Ron Gettelfinger says he's happy that the White House appears poised to step in and rescue the auto industry, and he accused GOP senators who blocked emergency loans of trying to "pierce the heart" of organized labor.
Gettelfinger, at a news conference, said he doesn't think the union will have to negotiate wage cuts or other terms with the White House for the industry to get federal loans.
In beleagured communities affected by the industry's collapse, hope was widespread for constructive action.
"For God's sakes, I hope the president acts," Mayor Virg Bernero of Lansing, Mich., said Friday morning.
"This is not the time to be engaged in tough love against any industry," Nariman Behravesh, chief economist at economic consulting firm IHS Global Insight, said in a conference call with clients Thursday. "It will worsen the recession if the automanufacturers do have to declare bankruptcy and shut their doors."
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.
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, another 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."
Contributing: Ken Dilanian in Washington; Sharon Silke Carty in Detroit and wire services.