WASHINGTON – The Bush administration is looking at “orderly” bankruptcy as a possible way to deal with the desperately ailing U.S. auto industry, Treasury Secretary Henry Paulson said Thursday as carmakers readied more plant closings and a half million new jobless claims underscored the deteriorating national economy.
With General Motors, Chrysler and the rest of Detroit anxiously awaiting a White House decision on billions of dollars in emergency federal loans, Paulson said bankruptcy for Detroit automakers should be avoided if possible but that an orderly reorganization may be the best option to keep them from collapsing.
“If the right outcome is reorganization or bankruptcy, then isn’t it better to get there through an orderly process?” Paulson said in a speech to a business forum Thursday night in New York.
Paulson said it was too risky to simply let the automakers fail.
“When you look at the size of this industry and look at all those that it touches in terms of suppliers and dealers … it would seem to be an imprudent risk to take,” he said.
President George W. Bush, asked earlier about an auto bailout, said he hadn’t decided what he would do but didn’t want to leave a mess for Barack Obama who takes office a month from Saturday. A White House decision on helping the troubled automakers could come today.
Bush, like Paulson, spoke of the idea of bankruptcies orchestrated by the federal government as a possible way to go – without committing to it.
“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.”
Paulson said Bush wants to avoid automakers filing for bankruptcy protection but that the No. 1 priority is putting automakers back on a viable path. Part of that effort, he said, would require all sides coming together to make sacrifices to boost competitiveness.
“It’s difficult to do such things outside of reorganization. But sometimes that can be successfully done,” Paulson said.
White House press secretary Dana Perino addressed the bankruptcy question earlier in the day and emphasized there were still several possible approaches to assisting the automakers, including short-term loans from the Treasury Department’s $700 billion Wall Street bailout program.
The Big Three automakers said anew that bankruptcy wasn’t the answer, as did an official of the United Auto Workers who called the idea unworkable and even dangerous.