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Carmakers may be next up for bailout
White House confirms talks with auto companies about possible help from $700 billion program.
By Chris Isidore, CNNMoney.com senior writer
Last Updated: October 27, 2008: 2:04 PM ET

NEW YORK (CNNMoney.com) -- Bush administration officials have had talks with the nation's automakers about providing possible federal help for the cash-starved companies, a White House spokeswoman said Monday.

Spokeswoman Dana Perino, responding to questions at her daily press briefing, said a decision had not been made yet about whether federal help will be offered to General Motors (GM, Fortune 500), Ford Motor (F, Fortune 500) and Chrysler LLC.

A number of experts have expressed concern that the automakers, which have suffered a sharp plunge in sales this year, could run through their cash reserves by next year.

The automakers could get help through the $700 billion Wall Street bailout passed by Congress earlier this month. The bailout was designed to prompt banks and securities firms to loan money to businesses and consumers, but automakers might qualify for help through their finance arms, Perino said.

"It's possible that some of those financing arms could be a part of the rescue package, the TARP, as they call it, at the Treasury Department," Perino said. "That's one of the reasons Treasury has been in contact with them."

Earlier this year, Congress approved a $25 billion loan program to help the automakers finance a switch in production from larger vehicles, such as pickups and full-size SUVs, to more fuel efficient vehicles.

The government has not started dispersing money under that program. The Department of Energy is working on regulations to govern the loans.

"I think that it's clear that the automakers are dealing with a very serious situation," Perino said. "They have been for some time."

GM spokesman Greg Martin acknowledged Monday that automakers are interested in getting help from the federal government.

"We have been in contact with a variety of federal officials for some time during this extraordinary and difficult economic period," said Martin, who is the automaker's Washington-based spokesman.

Martin declined to elaborate on the discussions. "We have said publicly that we believe the federal government should consider all of the tools available to it - some recently enacted - to support industries that are in distress and that are essential to the U.S. economy."

Last week, Michigan's 17-member congressional delegation signed a letter to Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke asking that the federal government help the U.S. automakers. The delegation is made up of nine Republican members of the House and seven Democrats, along with the two Democratic senators.

"There is no single segment of America's economy that is more critical to the financial well-being of millions of Americans than the automotive industry," the letter stated. "One in ten American jobs is related to auto manufacturing.

"In this current economic environment it is imperative that the government ensures that liquidity is restored so that the U.S. auto industry is able to function until normalcy is restored to credit markets," the letter continued.

Full text here: http://money.cnn.com/2008/10/27/news/companies/auto_bailout/index.htm?postversion=2008102712
 
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