Struggling automakers, government officials talk about expediting loans

DETROIT -- Hoping to pump money quickly into an ailing auto industry, the government has been talking with the biggest automakers and suppliers about how to speed dispersal of $25 billion in loans that Congress approved.

The loan program is intended to help automakers and suppliers retool their plants to manufacture cars and parts that improve fuel efficiency.

To get the cash out quickly, the administration is considering streamlining the process, says this person, and front-loading the loans so automakers get more sooner. Original plans called for doling out the money over a few years.

Separately, GM CEO Rick Wagoner has been talking to the administration about a way for the government to put survival cash into GM's pocket, money that could finance a merger with Chrysler.

The first tangible government aid, however, came Tuesday when GMAC, the financial arm co-owned by GM and Chrysler owner Cerberus Capital Management, said it was granted access to the Federal Reserve's new short-term lending facility.

Wall Street saw a silver lining in the developments: GM rose nearly 15%, or 80 cents, to $6.25.

Not everyone thinks the industry should be bailed out. Rep. Jeff Flake, R-Ariz., sent a letter to the president saying he thinks federal intervention to help ailing companies is going too far.

"Many of us feared that the nationalization of the financial sector would spread to other industries," he wrote. "Today, it's the automakers asking for a bailout. … We can expect the airline industry and other struggling industries to be next in line."

Richard DeKaser, National City's chief economist, says the industry accounts for 1% or 2% of gross domestic product, not the 3% or 4% of housing, for example: "In terms of what qualifies for federal assistance, there's a reasonable test. Does it represent an important, systemic element of our economy? Water, electricity, energy and the financial system pass that test. … I don't think the auto industry passes that test as an industry, and especially not when you narrow it to GM" or any one company.