WASHINGTON — With General Motors and Chrysler near bankruptcy and the failure of a $14-billion bailout bill for U.S. automakers, the White House was preparing to step in with short-term aid to prevent what could be a catastrophic hit to the economy.
President Bush and Treasury Secretary Henry M. Paulson were weighing their options Friday, although officials said action was unlikely this weekend.
The White House said Bush was considering tapping the $700-billion Wall Street bailout fund -- even though he previously said that money should be used only for financial institutions.
"A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time," White House spokeswoman Dana Perino said.
General Motors has said it needs $4 billion by the end of the month and an additional $6 billion by March 31, and Chrysler also was asking for $4 billion in emergency loans to make it to the spring. Ford has not requested funds but has said the failure of GM or Chrysler would endanger it as well.
The White House statement came as GM announced massive production cuts through the first quarter of next year, reducing its vehicle output by about 30%, or 250,000 vehicles. It will do that by idling 21 plants for a month, including three each in Canada and Mexico.
Chrysler had no statement Friday on the failure of the bailout bill in Congress, but Chairman Robert Nardelli, in an internal e-mail, told employees, "We must eliminate every unnecessary cost in every aspect of our business. . . . Continued cost reduction is important to ensure the future viability of the company."
GM stock dropped 4.4% on Friday to $3.94 and Ford shares fell 5.2% to $2.39. Chrysler is privately held.
News of possible help from the White House tempered fears on Wall Street and in Detroit. GM spokesman Tony Cervone said the company was "encouraged by the White House's willingness to consider other options."
But at Star Ford in Glendale, Kevin Gorman was worried about the auto industry.
"It seems like it's another sign that our country is in a recession," said Gorman, a retail sales manager who was getting his Mustang serviced. He said a bailout would help the economy.
For some of the 1.2 million employees at auto dealerships nationwide, the failure of the bailout in Congress stoked fears.
