The White House said today it would be "irresponsible" to let Detroit's automakers collapse and suggested it will use a bailout fund it had previously said was not meant for the sinking car industry.
The revised view came the morning after senators killed an effort to provide $14 billion in emergency loans to Detroit automakers when a last-ditch attempt to renegotiate the deal collapsed. The House had passed its version of the measure on Wednesday night but the Senate was unable to follow suit.
Administration officials were already in officials from General Motors and Chrysler on Friday in the wake of last night's defeat in the Senate, although the White House made it clear that no decision had been made to intervene.
"We will consider other options if necessary -- including use of the TARP program -- to prevent a collapse of troubled automakers," White House press secretary Dana Perino said today.
The White House had previously resisted calls to use funds from the Troubled Asset Relief Program, passed into law this fall to rescue the financial industry, and had insisted lawmakers boost the auto industry by other means, preferably by using part of a $25 billion already allocated to the car industry for a fuel efficiency program.
But today, the White House called the Senate's failure to act "disappointing" and said "it would be irresponsible to further weaken and destabilize our economy at this time."
"The approach in that legislation provided an opportunity to use funds already appropriated for automakers, and presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds go only to firms whose stakeholders were prepared to make the difficult decisions to become viable, competitive firms in the future," the White House statement said.
"Under normal economic conditions we would prefer that markets determine the ultimate fate of private firms."
Administration officials are considering a range of options that fall into three categories. The administration could provide a short-term fix to keep the companies afloat until next year, which would not necessarily be as much as the $14 billion in the congressional bill. They could also opt for a government-forced restructuring that would aim to accomplish what Congress failed to do, such as calling a car czar, labor concessions and creditor concessions. The administration could also turn to "an orderly bankruptcy."
"If we decide to do it, when, how and under what conditions are open questions," said a senior administration official on Friday.
"Nobody should expect easy terms," the official added.
Without any help from the government, others were quick to mull what might come next and whether the struggling auto industry will survive the winter. On Friday morning, General Motors announced it would remove approximately 250,000 vehicles from production during the first quarter of the new year, a move that would impact 20 of its plants in the U.S., Canada and Mexico, according to the company's release.
This morning United Auto Workers President Ron Gettelfinger also weighed in on the collapse of negotiations. In the end, the sticking point in the Senate was the refusal of the UAW to agree to steep wage cuts by a date certain in 2009.
"As everyone's well aware, the auto industry around the world is in peril," Gettelfinger said.
"We could not accept the effort by the Senate GOP caucus to single out workers and retirees for different treatment."
Gettelfinger added that UAW is calling on Treasury Secretary Henry Paulson or the Federal Reserve to step in to "prevent the imminent collapse of the auto industry."
Where the Money Might Come From
Meantime, there has been bipartisan outrage over the way the first $350 billion of the $700 billion for the TARP program has been spent. And under the law that created TARP, Congress can vote to refuse access to the second $350 billion.
On Capitol Hill this morning, there was widespread expectation that the Administration will seek access to the second half of the money for that program.
While there's a good chance Congress would vote against giving Paulson the money due to its disapproval of the way in which the first half was spent, the likelihood of doling out the funds greatly increases if Paulson decides to use the remaining funds in the first chunk of money to help the automakers.
There happens to be about $15 billion of the first $350 billion left.
If a request for access to the other half of the money comes from the White House, it's expected that Congress could come back in session for one last act.
The Action on Capitol Hill
Late Thursday, the effort on a bill to boost the auto industry died on a 52-35 procedural vote in the Senate, well short of the 60 votes needed to bring the bill to the floor for passage.
"I dread looking at Wall Street tomorrow," said Senate Majority Leader Harry Reid, D-Nev. "It's not going to be a pleasant sight."
Wall Street markets were surprisingly steady today.
After the vote, Reid urged the White House to use the part of the TARP funds to help keep the auto industry afloat.
Senators had spent the afternoon and evening in negotiations on an alternative measure to the one passed in the House. The late-in-the-game alternative was proposed by Sen. Bob Corker, R-Tenn., who in part wanted to revise the existing rescue deal to force pay cuts for union workers.
On Friday, Corker said he felt a "sense of surrealness" when he thinks about how close the two sides were last night. Corker also argued that the UAW would ultimately have benefited from his plan and urged Paulson to take the elements of his plan and attach them as conditions of TARP money given to the auto companies.
After the failed Senate vote on Thursday night, the White House quickly released a statement of regret saying, "We will evaluate our options in light of the breakdown in Congress."
General Motors also issued a statement expressing disappointment. "We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis."
Obama's Push for Bailout Was Rejected
Chrysler, too, said it would "continue to pursue a workable solution to help ensure the future viability of the company."
Efforts started to unravel midday Thursday, when Senate Minority Leader Mitch McConnell announced on the Senate floor that he would oppose the earlier bipartisan auto rescue package backed by Democrats and the White House, and instead back Corker's proposal.
"A lot of struggling Americans are wondering where their bailout is," said McConnell, arguing that, at some point, the bailouts have to stop, and that the Wall Street bailout he supported was for the entire economy and not just one industry.
McConnell's announcement came at the same time that President-elect Barack Obama was speaking in Chicago, saying, "we cannot simply stand by and watch this industry collapse."
Obama said that "doing so would lead to a devastating ripple effect throughout our economy." He said the government should provide a short-term loan and said he hopes an agreement can be reached this week on Capitol Hill.
ABC News' Kirit Radia, Michael James, Rachel Martin and Dean Norland contributed to this report.