Bush OKs $17.4B bailout of the auto industry

Citing danger to the national economy, President Bush approved an emergency bailout of the U.S. auto industry Friday, offering $17.4 billion in rescue loans in exchange for tough concessions from the deeply troubled carmakers and their workers.

Allowing the massive auto industry to collapse in the middle of what is already a severe recession "would worsen a weak job market and exacerbate the financial crisis," Bush said. "It could send our suffering economy into a deeper and longer recession. And it would leave the next president to confront the demise of a major American industry in his first days of office."

President-elect Barack Obama, who takes office a month from Saturday, praised the White House action but also warned, "The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely necessary to save this critical industry and the millions of American jobs that depend on it, while also creating the fuel efficient cars of tomorrow."

Stock prices rallied on Wall Street as investors cheered the government's action. Republicans on Capitol Hill, though, expressed disdain for the bailout. And while the United Auto Workers said the plan would keep factories running, the union said it was upset by loan conditions "singling out workers."

"We will work with the Obama administration and the new Congress to ensure that these unfair conditions are removed," said Ron Gettelfinger, president of the UAW.

Obama will be free to reopen the arrangement from the government's side if he chooses, an administration official said.

Bush said, "The time to make hard decisions to become viable is now, or the only option will be bankruptcy. The automakers and unions must understand what is at stake and make hard decisions necessary to reform."

Some $13.4 billion of the money would be available this month and next — $9.4 billion of it for General Motors and $4 billion for Chrysler LLC. GM is slated to receive the remaining $4 billion in loans after more money is released from the financial rescue account.

Under terms of the loans, the government will have the option of becoming a stockholder in the companies, much as it has with major banks, in effect partially nationalizing the industry. Bush said the companies' workers should agree to wage and work rules that are competitive with foreign automakers by the end of next year.

And he called for elimination of a "jobs bank" program — negotiated by the United Auto Workers and the companies — under which laid-off workers can receive about 95 percent of their pay and benefits for years. Early this month, the UAW agreed to suspend the program.

Treasury Secretary Henry Paulson said Congress should release the second $350 billion from the financial rescue fund that it approved in October to bail out huge financial institutions. Tapping the fund for the auto industry basically exhausts the first half of the $700 billion total, he said.

If the carmakers fail to prove viability by March 31, they will be required to repay the loans, which they would find all but impossible. A firm will be deemed viable only if it can show positive cash flow and can fully repay the government loans.

General Motors Corp. CEO Rick Wagoner said in Detroit that GM had much work ahead but he was confident it could reinvent itself with the government help and even lead an economic recovery in America.

House Republican leader John Boehner called the administration's plan "regrettable." He said that granting loans for automakers was never the intention when Congress passed the $700 billion plan to rescue financial institutions and that the new plan "has failed both autoworkers and taxpayers."

Rep. Jeb Hensarling, R-Texas, chairman of the congressional oversight panel for the Wall Street rescue program, decried the decision, saying a Chapter 11 reorganization, not loans rewarding decades of mismanagement, would have been a better decision.

"Unless union contracts are renegotiated, and unless demand picks up for domestic autos, $14 billion, $34 billion, $74 billion — even $104 billion — will not solve the problem," Hensarling said. "I fear that a devastating precedent has been set that the federal government will now be pressured to bail out every failing company in America — something that taxpayers and future generations cannot afford."

Under terms of the loan, GM and Chrysler must provide the government with stock warrants giving it the option to buy GM and Chrysler stock at a specific price. In addition, the automakers would be required to agree to limits on executive pay and eliminate some perks such as corporate jets.

Paulson, who plans to discuss the deal with congressional leaders and Obama's transition team in the near future, said he was confident that the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. have the resources to address a significant market crisis if one should occur before Congress approves the use of the second half of the rescue fund.

Friday's rescue plan retains the idea of a "car czar" to make sure the auto companies are keeping their promises and moving toward long-term viability.

The short-term overseer will be Paulson. But the White House deputy chief of staff, Joel Kaplan, said that if the Obama team wants someone else installed to bridge the administrations, Bush is open to that. Kaplan said there have been discussions with Obama's aides throughout the process and the White House believes Obama's view of the problem and the solution tracks with theirs.

The White House package is the lifeline desperately sought by U.S. automakers, who warned they were running out of money as the economy fell deeper into recession, car loans became scarce and consumers stopped shopping for cars.

The carmakers have announced extended holiday shutdowns. Chrysler is closing all 30 of its North American manufacturing plants for four weeks because of slumping sales; Ford will shut 10 North American assembly plants for an extra week in January, and General Motors will temporarily close 20 factories — many for the entire month of January — to cut vehicle production.

Chrysler CEO Bob Nardelli thanked the administration for its help.

In a statement Friday morning, Nardelli said the initial injection of capital will help the company get through its cash crisis and help eventually return to profitability. He said Chrysler was committed to meeting the conditions set by Bush in exchange for the money.

Ford President and CEO Alan Mulally said his company would not seek the short-term financial assistance but predicted the aid would stabilize the industry.

"The U.S. auto industry is highly interdependent, and a failure of one of our competitors would have a ripple effect that could jeopardize millions of jobs and further damage the already weakened U.S. economy," Mulally said.

GM to temporarily close 20 plants to slash output

General Motors Corp. said Friday it will temporarily close 20 factories across North America and make sweeping cuts to its vehicle production as it tries to adjust to dramatically weaker automobile demand.

GM said it will cut 250,000 vehicles from its production schedule for the first quarter of 2009, which includes a cut of 60,000 vehicles announced last week. Normal production would be around 750,000 cars and trucks for the quarter, spokesman Tony Sapienza said.

Many plants will be shut down for the whole month of January, he said, and all told, the factories will be closed for 30 percent of the quarter.

"We're adjusting pretty dramatically," spokesman Chris Lee said.

The move affects most of GM's plants in the U.S., Canada and Mexico. During the shutdowns, employees will be temporarily laid off and can apply to receive a portion of their normal pay from the company. They can also apply for state unemployment benefits, Lee said.

GM and nearly all automakers who sell in the U.S. are mired in the worst sales slump in 26 years. GM reported its sales in the U.S. plunged 41 percent in November and are down 22 percent for the first 11 months of the year compared with the same period last year.

Cash-strapped GM is seeking government loans to stay in operation beyond the end of the year. The White House said Friday it may tap into its $700 billion Wall Street bailout fund to help GM and Chrysler stay in business after the Senate blocked a measure to provide $14 billion in immediate loans.

The measure failed in dramatic fashion late Thursday after Senate Republicans balked at passing the bill without more wage and benefit concessions from autoworkers.

Lee said Friday's production cuts are unrelated to the rescue's failure and had already been planned.

The entire auto industry has been making massive production cuts recently as it adjusts to the reality of lower automobile demand. Earlier Friday, Honda Motor Co. said it was cutting production in North America by 119,000 vehicles for its fiscal year ending March 31.

That brings Honda's expected production for its fiscal year to 1.3 million units, a spokesman said.

Auto demand in the U.S., and increasingly around the world, has been hobbled due to the declining economy and the credit squeeze, which has made it more difficult and more costly for some buyers to obtain financing. Industrywide vehicle sales crumbled 37 percent in November, with every major automaker posting giant sales declines.

Lee said GM's production cuts will be achieved by adding "down weeks" to the schedules at the affected plants. During down weeks, which can be staggered during a given period of time or can come several at once, the plant will not produce anything and employees will be temporary laid off.

"We look at it on a plant-by-plant basis and make decisions regarding their production schedule in terms of market demand, so it's not a blanket ... we look at it plant by plant and make those decisions," Lee said.

Congress sends White House auto aid proposal

Congressional Democrats have sent the White House a draft of a roughly $15 billion auto bailout that's expected to come to a vote this week. According to a draft obtained by The Associated Press, the measure would rush bridge loans to Detroit's struggling Big Three and put an overseer chosen by President George W. Bush in charge of monitoring an auto industry restructuring.

The overseer could recall the loans as early as February if the carmakers weren't doing enough to reinvent themselves and become viable. And if the Big Three didn't come up with suitable restructuring plans by the end of March, the "car czar" would have to submit his own blueprint to Congress for a government-mandated overhaul.

Car dealers get creative as brethren shutter shopsStory Highlights

A newspaper advertisement for a Miami car dealership reads more like a coupon for bags of potato chips: "Buy one, get two!"

The ad speaks to the desperation of car dealers as Big Three auto manufacturers beg Washington for billions in bailout dollars to combat sales that keep dipping to all-time lows.

"The first thing people think when they come in is, 'It's a fake ad. It's a normal car dealer ad. It's a gimmick.' But it's not," said Ali Ahmed, sales manager at Rob Lambdin's University Dodge in Miami.

Get a new car or truck at 75% off

To be fair, there is a catch to the buy-one-get-one-free offer: You must first buy a new Dodge truck at full retail price before you're eligible to receive a second truck for about $3,000 in tax, tags and dealer fees.

"We've been fielding phone calls and e-mail inquiries from every state in the country looking to get this buy-one-get-one deal," Ahmed said.

About 700 dealerships, most of them selling cars from U.S. automakers, have shut their doors since the beginning of the year. The number is expected to hit 900 by year's end.

Last month, National Automobile Dealers Association Chairwoman Annette Sykora told the House Financial Services Committee some 19,700 dealerships will still be around by the end of 2008, compared with 50,000 in the 1940s.

Auto sales are at a 15-year low, she said, which affects more than the Big Three automakers. Dealers are slashing personnel and expenses. Sykora herself has had to cut staff by about 20 percent at her dealerships, she said. iReport.com: Ask the automakers your questions

Sykora, a third-generation car saleswoman who sells Big Three automobiles at dealerships in Slaton and Levelland, Texas, said she recently sat down with the superintendent of Slaton schools.

"We started discussing what would happen if the dealerships in my hometown were to close," she said during her November 19 testimony. "The loss of tax revenue would force them to cut programs and teachers.




"Many displaced dealership families might have to leave town in search of work in other places, compounding the loss. This same scene would play out in hundreds of communities in the U.S."

Dealerships, Sykora explained, are independent businesses, not arms of the automakers. They invest in land, equipment, buildings and take out millions of dollars in loans to put the vehicles on their lots and showroom floors.

She also said car dealerships are a prime source of advertising revenue for local media, they support charities and Little League teams and they are integral to the tax base, she said.

"One-fifth of the nation's retail purchases are automobiles. By getting automotive retailing back on track, Congress can effectively leverage the economic engine of the automobile industry to get this economy running on all cylinders again," she said, pleading with Congress not to let the Big Three file for bankruptcy.

With the world's economy reeling, expensive items like cars are not high priorities for families and businesses. It doesn't help that the credit crunch is making it difficult to get loans, which the majority of U.S. consumers need to purchase vehicles.

Also compounding matters is consumer confidence, which hit an all-time low in October and didn't improve much in November, according to the nonprofit Conference Board, which maintains indices on consumers' trust in the marketplace.

According to Autodata, car sales have plummeted since last year. In the United States, the number of sales of passenger cars and light trucks in November 2008 was down 36.7 percent from November 2007 -- from about 1.18 million to 747,000.

Also, as of November 2008, automakers had sold about 12.35 million cars and light trucks, compared with 14.76 million during the same time period last year -- a drop of 16.3 percent, according to Autodata's summary of U.S. light vehicle retail sales.

Comparing November 2008 sales with those in November 2007, Autodata reported that General Motors saw a 41.3 percent drop, Ford a 30.5 percent drop and Chrysler 47.1 percent.

But it's not just U.S. automakers taking a hit: Toyota's vehicle sales declined 33.9 percent, Honda's dipped 31.6 percent and Nissan's dropped 42.2 percent during that time period, Autodata reported.

"It's definitely a tough climate right now," said Matt Lee, floor manager for Major World Auto in New York. "A lot of people are saying it's a perfect storm of gas prices and financing and consumer confidence."

Major World Auto used to sell about 150 cars a month. It now sells about half that, Lee said. And of the 15 to 20 salespeople who used to roam the salesroom floor, about 10 are left, he said.

"Salesmen actually just walked out because they're not making enough money to support their family," he said.

Major World has stopped bringing in new models because it can't sell the cars it has. Like University Dodge in Miami, it is resorting to some creative sales pitches, including zero-percent financing for 72 months and rebates of up to $7,500.

But even with the bargains, car dealers are having trouble getting customers into the showrooms. In a recent CNN visit to Major World, which lasted about two hours, only one customer walked onto the lot -- to browse.

"Where you would see five people a day coming in to at least look at a car per salesmen, you're getting maybe one person a day or two people a day," salesman Jamie Krinsky said.

If the Big Three file for bankruptcy, Sykora told Congress last month, sales and confidence will continue to plummet.

"Imagine how banks would react to a dealer who has asked for millions of dollars to finance new and used inventories from an automaker going through 'reorganization,' " she said.

The government can help boost auto sales in many ways, Sykora said, citing two proposed tax incentives: one that would make interest payments on car loans tax deductible and another that would encourage consumers to upgrade their older cars for more fuel-efficient models. "Cash for clunkers" programs are in place in Texas and California, she said.

"Whether it's my dealerships in Texas or it's the dealership in your community, the fact is local dealerships will be a major factor in our economic recovery," she told the House committee. "To get the economy back on track, we must restore consumer demand, and the only way to do that is to restore consumer confidence."

Automakers back to try to sell Congress on rescue

U.S. automakers are returning to Congress for high-stakes hearings they hope will persuade skeptical lawmakers to save their troubled industry with $34 billion in emergency aid, but a top Senate Democrat wants to hand their problem to the Federal Reserve.

Two weeks after a botched attempt on Capitol Hill, repentant leaders of General Motors Corp., Ford Motor Co. and Chrysler LLC were appealing to the Senate Banking Committee on Thursday with three separate survival plans that include massive restructuring, the ditching of corporate jets and vows by CEOs to work for $1 a year.

But they could expect a chilly reception on Capitol Hill. Even a top Democrat in charge of evaluating their aid requests made it clear he was eager to avoid voting on a bailout. Sen. Chris Dodd, D-Conn., chairman of the Senate Banking Committee, wrote to Federal Reserve Chairman Ben Bernanke on Wednesday asking the central bank chief whether there was anything stopping him from using his considerable lending authority to help the automakers.

And Senate Majority Leader Harry Reid, D-Nev., said it was up to the Bush administration to unilaterally rescue the Big Three with loans drawn from the $700 billion Wall Street rescue fund, since Congress was still unwilling to do so. "I just don't think we have the votes to do that now," he told The Associated Press.

Dodd's committee was hearing testimony on the companies' plans from GM CEO Rick Wagoner, Ford CEO Alan Mulally, Chrysler CEO Bob Nardelli, UAW president Ron Gettelfinger and the head of the Government Accountability Office. The House Financial Services Committee was to hold a similar session on Friday.

Automakers were trying to make the case that the billions in loans would be a bridge to survival and profitability.

In the streets outside the Capitol, all three companies were showcasing their futuristic, green models in hopes of counteracting their image as purveyors of gas-guzzling SUVs. Wagoner planned to drive to the hearing in a test version of the Chevrolet Volt, an extended-range electric vehicle expected to go on sale in 2010.

Reid and House Speaker Nancy Pelosi, D-Calif., said the hearings would help determine whether Congress would consider a massive aid package for the industry in a special session next week. Critics say the companies have been poorly managed and failed to show they won't be back for another government rescue.

The Big Three are struggling to stay afloat heading into 2009 during an economic recession, a steep decline in sales and a tight credit market. The three companies burned through nearly $18 billion in cash reserves during the last quarter.

Chrysler said it needed $7 billion by year's end to keep operating. GM asked for an immediate $4 billion as the first installment of a $12 billion loan, plus a $6 billion line of credit to use if economic conditions deteriorate. Both said in plans submitted to Congress that they could drag the entire industry down if they fail. Ford requested a $9 billion "standby line of credit" in case one of its Detroit competitors fails.

Wagoner and Mulally both say said they'll work for $1 a year -- a move Chrysler's Nardelli has already made -- if their firms accept government loans. All three plans envision the government getting a stake in the auto companies that would allow taxpayers to share in future gains if they recover.

In Detroit, the United Auto Workers union said it would delay the three companies' payments to a multibillion-dollar, union-run health care trust and essentially end a jobs bank program in which laid-off workers are paid most of their salaries. They also decided to let the Detroit leadership begin renegotiating elements of landmark contracts signed last year, a move that could lead to wage concessions.

The companies, union officials and car dealers were lobbying feverishly for the loans, arguing that the collapse of one or more of the Detroit carmakers would throttle the already weakened U.S. economy and jeopardize the nation's manufacturing sector.

Yet the bailout remains unpopular with the public. Sixty-one percent oppose providing the auto companies with billions in federal assistance, according to a CNN-Opinion Research Corp. poll released on Wednesday. Fifty-three percent said it would not help the country's economy.

The auto executives were roundly criticized for taking corporate jets to the hearings last month and this time made the 520-mile trip to Washington aboard hybrid cars. Underscoring the different approach, Wagoner and GM officials ate lunch Wednesday at Quiznos at a Pennsylvania rest stop along the way.

UAW to renegotiate labor terms, suspend jobs bank

The United Auto Workers said Wednesday it is willing to change its contracts with U.S. automakers and accept delayed payments of billions of dollars to a union-run health care trust to do its part to help the struggling companies secure $34 billion in government loans.

United Auto Workers President Ron Gettelfinger said the union will suspend the jobs bank, in which laid-off workers are paid up to 95 percent of their salaries while not working, but he did not give specifics or a timetable of when the program will end.

"We're going to sit down and work out the mechanics," Gettelfinger said at a news conference after meeting with local union officials. "We're a little unclear on some of the issues."

Members of Congress criticized the automakers last month for paying workers who are not on the job. About 3,500 auto workers across the three companies are currently in jobs bank programs.

One local union member who was in the meeting said the changes to the jobs bank would nearly eliminate the program. The member asked not to be identified because the details had not been made public.

Gettelfinger stopped short of saying the union would reopen contract talks with General Motors Corp., Chrysler LLC and Ford Motor Co. but said it would be willing to return to the bargaining table to change some terms.

Talks with GM will begin immediately, but additional bargaining officials must be elected for Ford and Chrysler, Gettelfinger said, and any modifications would still have to be ratified by local union members.

He also said the union will run a television ad in Maine, Kentucky, Indiana and Minnesota to put the faces of union workers on the controversy over the loans, and explain how the auto industry differs from the banking industry. The ads presumably are designed to pressure Congressional opponents of the loans.

"There's a perception problem," Gettelfinger said, stressing that the automakers' woes have painted a negative view of the union. "Yes, we have lost some clout."

Delaying the health care trust payments will help the companies survive their cash shortages, which they say were brought on by the severe economic downturn and the worst U.S. sales climate in more than a quarter century.

GM had been scheduled to pay more than $7.5 billion early next year to the union-administered fund which will take over retiree health care payments on Jan. 1, 2010. Ford owes $6.3 billion to its trust fund at the end of this year. Chrysler figures were unavailable.

The delay will have to be approved by federal courts, which already have blessed the trusts' formation.

All three companies agreed to fund the trusts, called voluntary employee beneficiary associations or VEBAs, as part of the landmark 2007 contract reached with the UAW. By doing so they move billions in liabilities off their books.

When they go into effect, the trusts will pay health care bills for about 800,000 UAW retirees, spouses and dependents at the three companies. GM expects to save about $3 billion a year when the expenses are moved, while Ford says it will save $1 billion.

The CEOs of all three automakers are heading to Washington for more hearings Thursday and Friday on their loan requests after an abysmal showing before lawmakers last month. Gettelfinger will also attend.

Congressional leaders demanded business plans from all three that include a reduction in labor costs so Detroit is more competitive with foreign automakers with U.S. factories. The companies submitted their plans to Congress on Tuesday.

"I don't think Congress is out for blood," Gettelfinger said of the criticism the union received during his previous testimony last month. "There will be more pressure on us to do this. We're going to step up and do it."

That sentiment was echoed by several union representatives at the news conference.

"Everybody has to give a little bit," said Rich Bennett, an official for Local 122 in Twinsburg, Ohio, representing Chrysler workers. "We've made concessions. We really feel we're doing our part."

But a retired GM worker said the union might be acting hastily out of fear that one of the automakers could shut down.

"Fear is a bad basis on which to make decisions," said Frank Hammer, of Local 909 in Warren, Mich. "I think they're making another mistake."

Members at Local 122 are fearful of losing their jobs, said Bennett's associate, Ken Walters. They're seeing nearby plants shut down on regular basis.

General Holliefield, the UAW vice president representing Chrysler workers, said union members "historically do the right thing" in terms of making concessions during tough times, although the moves outlined Wednesday came to fruition following last month's congressional thrashing.

"Washington didn't ask us for concessions," he said. "It wasn't anything we were thinking about."

The president of Chrysler said the UAW's willingness to change the union's contract is a good step.

Chrysler LLC President Tom LaSorda said during a Toledo rally for the industry on Wednesday that both sides need to go back and review the entire framework of the contract. He said if the union would surrender job security protections it would help the Detroit Three in the long run.

General Motors sales plunge 41 pct.

Detroit-based General Motors Corp. reported a 44 percent drop in demand for cars, while light truck sales dropped 39 percent.

A dreary economy, swooning consumer confidence and tight credit markets have combined to keep consumers out of vehicle showrooms this year. On Monday, the National Bureau of Economic Research said the U.S. entered a recession in December 2007, much earlier than most predictions.

Many analysts had expected November sales to come in slightly better, noting that aggressive incentive spending and the plunge in gasoline prices may have put a floor under sales. But GM, Ford, Toyota and Honda Motor Co. all posted month-over-month sales declines, pointing to a potential industrywide drop.

Toyota Motor Corp., Japan's No. 1 automaker, said truck sales plummeted 36 percent, while demand for passenger cars fell 32 percent, despite the automaker's extension of zero-percent financing on a dozen vehicles through the end of the month.

Automakers' sales reports are coming in the same day the U.S.-based automakers were scheduled to present plans to Congress for how they expect to return to profitability. Ford, GM and Chrysler LLC will go before lawmakers this week to ask a second time for a combined $25 billion federal loan to stave off bankruptcy.

GM shares traded in positive territory most of Tuesday morning but fell 31 cents, or 6.8 percent, to $4.28 after its sales report. Ford shares rose 5 cents, or 2 percent, to $2.60 in afternoon trading, while Toyota's U.S. shares rose $1.76, or 3 percent, to $60.32, and Honda gained 44 cents, or 2.2 percent, to $20.38.

GM reports $2.5B 3Q loss, says running out of cash

General Motors Corp. says it lost $2.5 billion in the third quarter and warned that it could run out of cash in 2009.

GM also said it has suspended talks to acquire Chrysler. While it didn't specifically name the automaker, GM said it was setting aside considerations for a "strategic acquisition."

The automaker also said its cash burn for the quarter accelerated to $6.9 billion due to a severe U.S. auto sales slump.

The company on Friday reported a net loss of $4.45 per share during the quarter, compared with a record-setting loss of $39 billion, or $68.85 per share, a year ago.

Revenue fell to $37.9 billion from $43.7 billion, due largely to credit freezing across the globe.

The loss exceeded Wall Street estimates. Analysts surveyed by Thomson Reuters predicted a loss of $3.70 per share on sales of $39.4 billion.

The struggling company announced it would improve liquidity by $5 billion by the end of next year by cutting capital spending, reducing sales promotions, and further cutting production in the first quarter. It also suspended the company match for its stock savings (401k) plan in the U.S.

"Even if GM implements the planned operating actions that are substantially within its control, GM's estimated liquidity during the remainder of 2008 will approach the minimum amount necessary to operate its business," the company said in a news release.

"Looking into the first two quarters of 2009, even with its planned actions, the company's estimated liquidity will fall significantly short of that amount unless economic and automotive industry conditions significantly improve" or it receives government funding, the news release said.

GM shares fell 53 cents, or 11 percent, to $4.27 in morning trading.

U.S. rejects GM's call for help in a merger

The Treasury Department has turned down a request by General Motors for up to $10 billion to help finance the automaker's possible merger with Chrysler, according to people close to the discussions.

Instead of providing new assistance, the Treasury Department told GM on Friday, the Bush administration will now shift its focus to speeding up the $25 billion loan program for fuel-efficient vehicles approved by Congress in September and administered by the Energy Department.

Treasury officials were said to be reluctant to broaden the $700 billion financial rescue program to include industrial companies or to play a part in a GM-Chrysler merger that could cost tens of thousands of jobs.

But it remained unclear whether the officials were also seeking to avoid making any decision that would conflict with the goals of a new presidential administration. The Democratic candidate, Senator Barack Obama, has said in recent days that he supports increasing aid to the troubled auto companies, while Senator John McCain has not said whether he would support aid beyond the $25 billion.

While GM and Chrysler continue to talk, no deal is expected until the government clarifies its role, if any. Potential investors in the deal have been hesitant to back the merger without federal assistance.

GM's chairman, Rick Wagoner, had lobbied Treasury Secretary Henry Paulson Jr. to provide emergency aid to the auto companies under the bailout program to stabilize the financial markets.

The Bush administration is still considering a range of options to aid the Detroit automakers, which are losing billions of dollars and rapidly depleting their cash reserves, said auto industry and administration officials, who did not want to be identified because of the sensitive nature of the discussions.

The first step is to get the Energy Department to expedite the release of the $25 billion in low-interest loans for GM, Chrysler and the Ford Motor Company.

Beyond that, the administration is also bringing the Commerce Department into discussions about channeling additional aid to the automakers.

With auto sales deteriorating to their lowest level in 15 years, Detroit's traditional Big Three are struggling to stay solvent and avoid bankruptcy.

The deepening troubles led GM into merger talks in September with Chrysler's majority owner, the private equity firm Cerberus Capital Management, and the request to the Treasury Department for assistance.

Auto industry executives and analysts said over the weekend that the loan program is essential to retooling plants and developing vehicles that meet more stringent government fuel-economy mandates.

Getting the loans will allow GM, Ford and Chrysler to redirect money already budgeted for cleaner cars to other capital needs.

"The auto companies are clearly running out of cash, and badly in need of more liquidity," said David Cole, chairman of the Center for Automotive Research in Ann Arbor, Michigan "Releasing the $25 billion in loans is a necessary first step."

The Detroit companies employ more than 200,000 workers in the United States and provide health care and pensions to more than one million Americans. The companies are also a lifeline to thousands of dealers and countless suppliers.

Support for aiding the industry is growing among political leaders in states with heavy automotive employment. Last week, the governors of Michigan, Ohio, New York, Kentucky, Delaware and South Dakota wrote a letter to Paulson and the Federal Reserve chairman, Ben Bernanke, urging "immediate action" to assist the industry.

"While all sectors of the economy are experiencing difficult times, the automotive industry is particularly challenged," the letter said. "As a result, the financial well-being of other major industries and millions of American citizens are at risk."

Cerberus, which bought Chrysler last year for $7.4 billion, has been unable to reverse a steady decline in the fortunes at the company, the smallest of Detroit's Big Three. While overall auto sales in the United States are down 12.8 percent this year, Chrysler's sales have fallen 25 percent, mainly because of its focus on gas-guzzling sport utility vehicles and pick-up trucks.

Cerberus has had discussions with the Japanese automaker Nissan Motor and its French partner, Renault, about bringing Chrysler into their international automotive alliance. But people familiar with the discussions said Cerberus is now focused solely on a potential GM deal.

The depth of the Big Three's problems will become even more evident this week with the release of October sales figures and third-quarter earnings announcements by GM and Ford.

Industry sales fell 26.6 percent in September, but October's totals could be even worse. The auto research Web site Edmunds.com forecasts that sales of new vehicles during the month will drop nearly 30 percent from the same period last year. More Articles in Business » A version of this article appeared in print on November 3, 2008, on page B1 of the New York edition.