White House considers 'orderly' bankruptcy for auto companies

— -- Speaking to the conservative American Enterprise Institute, President Bush said that in normal times he would have preferred to see the companies file for bankruptcy protection, saying "failing entities should be allowed to fail." Bush said the recession, however, requires that he do something to prop up U.S. automakers and avoid a "ripple effect throughout the world."

"I am worried about a disorderly bankruptcy, and what it would do for the psychology of the markets," Bush said. "They're beginning to thaw, but there's still a lot of uncertainty."

The form aid will take is unknown, but the White House has insisted on reorganization, in or out of bankruptcy court, that creates "viable" automakers. That would mean restructuring costs and debt with suppliers, creditors, labor, dealers and others.

"There's an orderly way to do bankruptcies that provides for more of a soft landing," said White House spokeswoman Dana Perino. "I think that's what we would be talking about."

Action to back the industry was left to the White House after Congress failed to pass legislation for $14 billion in loans to GM and Chrysler, who each say they need $4 billion immediately. Ford says it has enough cash for now but sought an emergency line of credit. The White House said last Friday that it would step in, and staff spent this week studying company documents and getting stakeholder input.

GM spokesman Tom Wilkinson, who is not directly involved in the talks, says people are anxiously awaiting news.

"I feel like an expectant father, pacing the hospital floors," he said. "There is so much anticipation."

GM shares closed down 16.3% at $3.66 and Ford down 9.6% at $2.84. Chrysler is privately held.

The White House mention of bankruptcy, orderly or otherwise, was not welcomed by many in the industry. There is widespread fear potential buyers will abandon any automaker that files for bankruptcy protection due to worries about vehicle resale values, warranty support and parts availability.