Bush considering "orderly" auto bankruptcy
By JENNIFER LOVEN, AP White House Correspondent
WASHINGTON – The Bush administration is seriously considering "orderly" bankruptcy as a way of dealing with the desperately ailing U.S. auto industry.
White House press secretary Dana Perino said Thursday, "There's an orderly way to do bankruptcies that provides for more of a soft landing. I think that's what we would be talking about."
President George W. Bush, asked about an auto rescue plan during an appearance before a private group, said he hadn't decided what he would do.
But he, like Perino, spoke of the idea of bankruptcies organized by the federal government as a possible way to go.
"Under normal circumstances, no question bankruptcy court is the best way to work through credit and debt and restructuring," he said during a speech and question-and-answer session at the American Enterprise Institute, a conservative Washington think tank. "These aren't normal circumstances. That's the problem."
The comments came a day after Chrysler LLC announced it was closing all its North American manufacturing plants for at least a month as it, General Motors Corp. and Ford Motor Co. await word on government action. General Motors also has been closing plants, and it and Chrysler have said they might not have enough money to pay their bills in a matter of weeks.
Prices of GM and Ford stocks were down substantially after the White House comments Thursday. Though Ford, unlike General Motors and Chrysler, is not seeking billions of dollars in federal bailout loans, a major collapse of the other two would be expected to badly damage Ford as well.
Bush said the auto industry is "obviously very fragile" and he is worried about what an out-and-out collapse without Washington involvement "would do to the psychology" of the markets.
"There still is a lot of uncertainty," he said.
At the same time, the president said anew that he is worried about "putting good money after bad," meaning taxpayer dollars shouldn't be used to prop up companies that can't survive the long term.
He revealed one other consideration — that Barack Obama will become president in just over a month.
"I thought about what it would be like for me to become president during this period. I believe that good policy is not to dump him a major catastrophe on his first day in office," Bush said.
At the White House, Perino said, "The president is not going to allow a disorderly collapse of the companies. A disorderly collapse would be something very chaotic that is a shock to the system."
She said the White House was close to a decision and emphasized there were still several possible approaches to assisting the automakers, such as short-term loans out of a $700 billion Wall Street rescue fund. Bush has resisted this approach before, and it is adamantly opposed by many Republicans.
"It's in the spectrum of options and there are a lot of options," Perino said.
She said one of the factors delaying an announcement on an auto rescue plan is the continuing discussion between the administration and the various sides that would have to sign on to a managed bankruptcy — entities such as labor unions and equity holders in addition to the companies themselves.
"In any scenario that comes forward after this decision-making process, all those stakeholders are going to have to make tough decisions," she said.
The presidential spokeswoman would not put a timetable on when an announcement would come, and suggested it may not happen this week. But something must be done, she said.
"If you thought that our economy today could handle the collapse of the American auto industry, then you might come to the conclusion that doing nothing was an option," Perino said. "We're going to do something."