The U.S. Treasury Department says it will step in to help the U.S. auto industry after Congress "failed to act." Treasury spokeswoman Brookly McLaughlin says the department is ready to act to prevent an imminent failure of the industry -- and help it return to long-term sustainability.
The White House also says it is considering helping U.S. automakers after the Senate turned down a US$14 billion bailout package for the Detroit Three.
U.S. President George Bush's press secretary, Dana Perino, said Friday that letting the automakers fail would be "irresponsible" because it would further weaken the economy.
If the White House decides to help, the money will likely come from the US$700 billion Wall Street bailout money.
However, the White House has repeatedly maintained that the money was meant to restore stability in the financial sector, not for emergency aid.
Perino, travelling with Bush aboard Air Force One, said the White House would normally prefer to let the financial markets decide the outcome of the companies.
Both Republicans and Democrats have been calling on the Bush administration after their rescue efforts, which would have been provided through federal loans, failed in the Senate late Thursday.
The Senate rejected the bailout 52-35 on a procedural vote, falling short of the 60 necessary to pass it.
The main sticking point was a refusal by the United Auto Workers to bow to Republican demands for workers to accept wage cuts before their current contract expires in 2011.
Bankruptcy possible
After the fallout, House Speaker Nancy Pelosi said the "only viable option" was for the Bush administration to act.
If they don't, the other option could be bankruptcy, most immediately for General Motors and Chrysler. Ford has said it does not need immediate help but it could face fallout if GM or Chrysler were to fall.
University of Toronto auto analyst Joseph D'Cruz said the automakers have failed to present a complete plan for their restructuring.
"We have to see a situation I think in which they use Chapter 11 bankruptcy protection to make a real major restructuring... including a complete change of top management, including a restructuring of their dealership networks, including a new contract with the unions," D'Cruz told CTV's Canada AM on Friday.
He said the Senate was right in holding back aid.
"Eventually I think the U.S. government will come in with some financial support but they will demand a much deeper restructuring than has been proposed," D'Cruz said.
In the U.S., the Detroit Three employs nearly 250,000 workers and more than 730,000 others work to produce material and parts for cars.
In a statement, GM said it was "deeply disappointed" about the failure in the Senate.
"We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis," the company said.
Chrysler said it would "continue to pursue a workable solution to help ensure the future viability of the company."
Unions react
At a press conference in Detroit, union officials said they were dumbfounded by the shortsightedness of the Republican GOP senate, who they said were acting in an ideological fashion.
UAW President Ron Gettelfinger said ideologues in the Republican senate caucus wanted workers to slash wages as part of the deal. Gettelfinger noted that workers at the "Detroit Three" have made the biggest sacrifices in contracts with carmakers and they are paid similarly to Toyota's American employees.
He called the pay issue as little more than "subterfuge" aimed at blinding Americans to the real issue.
"The GOP caucus was insisting that the restructuring would have to be done on the backs of workers and retirees," he said.
Earlier, he told an American radio station he was confident that "sane people" in Washington would come up with a package to help one of North America's most important industries.
Meanwhile, Chris Buckley, Canadian Auto Workers Union Local 222 president, said he was shocked that the rescue package was rejected.
"I honestly thought they'd come through with some financial aid, then we'd be rolling here in Canada," Buckley told CTV's Canada AM on Friday.
The Detroit Three have also delivered restructuring plans to the Ontario and federal governments, and they want help to the tune of up to $6.8 billion.
The biggest demand is from General Motors Canada, which wants $800 million immediately plus another $2.4 billion in repayable loans.
"We've told General Motors and both the federal and provincial government that the CAW would be part of the solution," Buckley said.
"We're willing to sit down with General Motors to see what we can do in order to help them survive."
Buckley said wages are not the problem but he said the CAW was willing to do "whatever it takes" to help.
"We could work for nothing and it isn't going to pull them out of this crisis," he said. "But again, the CAW is willing to do the responsible thing to help General Motors through this terrible situation."
With files from The Associated Press
