Despite warnings from Detroit's "Big 3" automakers that a single failure could pull down other companies, the White House Wednesday indicated it's still open to the idea of a possible bankruptcy.
The chief executives of Ford, G.M. and Chrysler are scheduled to appear before congressional panels Thursday and Friday to explain their recent request for a total of $34 billion in federal aid for the ailing industry - a figure substantially higher than the $25 billion they'd initially requested.
But while the Bush Administration said it was withholding judgment while it reviews plans the automakers submitted detailing how they'd use the money and cut costs to return to future viability, Press Secretary Dana Perino refused to rule out allowing one or more of the companies to go bankrupt.
"We don't want companies to go insolvent; that has been our position," Perino said in a press briefing. "But we do know that there are some companies [that] do fail. And that's the way that our system works."
Perino added that President Bush recognizes the intricacies of the auto industry and how tightly it is entwined with other sectors of the economy. That's why, she said, Bush was willing to go beyond his natural instincts to assist a company in a free market economy.
But, Perino said, the key question is whether the plans put forward by the automakers can demonstrate that they're willing to take dramatic actions and return their industry to financial viability.
"We want to try to help these companies," Perino said. "[But] we would only do so if the companies can prove viability. And that's the question right now -- whether or not these plans would provide for long-term viability."
She added, "We don't want anybody to be negatively affected by a bankruptcy, but sometimes companies do fail. That's just the way it is in our system."
Administration officials will be closely monitoring the testimony of the CEOs before Congress and conducting a thorough review of their proposals.
Ford is asking for a $9 billion bridge loan, which it says it hopes not to need unless sales get dramatically worse or one of the other domestic manufacturers fails. GM is seeking a total of $18 billion in loans and credit, $4 billion of which it says it needs just to survive through the end of the year, while Chrysler needs $7 billion to stay afloat.
However, House Speaker Nancy Pelosi, D-Calif., said Monday that allowing domestic automakers to go under was unacceptable.
"I believe that an intervention will happen either legislatively or from the administration. I think it is pretty clear that bankruptcy is not an option," Pelosi said at a press conference.
But Pelosi too said the automakers would have to meet certain goals in their proposals before Congress would step in to support them.
"We want to see a commitment to the future," she said. "We want to see a restructuring of their approach, that they have a new business model, a new business plan."
The source of the money for a federal bailout of the auto industry could still remain a sticking point.
The administration favors waiving restrictions on $25 billion in loans Congress already approved for automakers to help them retool to build more environmentally friendly vehicles while Pelosi and other Democratic leaders favor tapping part of the $700-billion financial rescue package that the Treasury Department has been using to prop up banks and financial institutions.
Meanwhile, President-elect Barack Obama, who takes over for President Bush on January 20th, said he too would wait for auto executives to make their case to Congress before ruling on the validity of their turnaround plans. Still, he stated that a "viable" auto industry was important for the country.
Speaking at a press conference where he tapped New Mexico Governor Bill Richardson as Commerce Secretary, Obama said he felt auto executives have put forward "serious" plans aimed at turning around the industry in the face of a weak economy and turmoil in credit markets.
For comments and feedback contact: editorial@rttnews.com
June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.