Bush administration officials were reviewing several approaches to assisting the automakers, including short-term loans from the Treasury Department's $700 billion Wall Street rescue program. But Treasury Secretary Henry Paulson told a business forum in New York on Thursday night that while bankruptcy for the automakers should be averted if possible, an "orderly" reorganization might be the best solution.
"If the right outcome is reorganization or bankruptcy, then isn't it better to get there through an orderly process?" Paulson asked.
Paulson said President George W. Bush wants to avoid bankruptcy - "if it can be avoided." But Paulson said the No. 1 priority was getting U.S. automakers back on a viable path. Part of that effort, he said, would require all sides making sacrifices to boost competitiveness with foreign carmakers.
"It's difficult to do such things outside of reorganization," he said. "But sometimes that can be successfully done."
"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.
The Big Three automakers said anew on Thursday that bankruptcy wasn't the answer, as did an official of the United Auto Workers who called the idea unworkable and even dangerous. For unions, bankruptcy could mean voided labor contracts and renegotiation of benefits. The car companies argue that no one would buy a vehicle from a bankrupt company for fear that the company might not be around to honor warranties or maintain a supply of spare parts.
The National Automobile Dealers Association also spoke out against bankruptcy "in any way shape or form, orderly or disorderly, prepackaged or unpackaged, managed or unmanaged," said spokesman Bailey Wood.
The White House has repeatedly emphasized its opposition to "disorderly bankruptcy"
- presumably filing under Chapter 7 of the bankruptcy act that would effectively shut down a company and require sale of its assets. That has left the possibility of one or more of the automakers filing under the act's Chapter 11, which allows a firm to operate while it reorganizes under a court's supervision.
