White House considers auto bailout options

WASHINGTON (AFP) — The White House said Monday it was studying options for a bailout of the US auto industry without indicating when an announcement would be made.

"We're reviewing automakers financial information, considering our policy options, and when we have something to announce, we'll announce it," said White House spokesman Tony Fratto.

He refused to "confirm or knock down or otherwise read out our contacts or deliberations, timing or substance."

The Big Three US automakers -- General Motors, Ford and Chrysler -- have warned that without a package of loans, millions of jobs could be lost, which would send ripple effects through the nation's already faltering economy.

President George W. Bush, who has hinted the government could tap a massive federal rescue package to aid the automakers, was Monday on his way back to Washington after surprise weekend visits to Iraq and Afghanistan.

His return could speed up a deal, after Bush said: "We're now in the process of working through with the stakeholders a way forward, and we're not quite ready to announce that yet.

He told reporters aboard Air Force One that "this will not be a long process because of ... the fragility of the autos."

Lawmakers have said time is running out for the auto giants, and traded blame with auto union chiefs over last week's collapse in the Senate of a short-term 14-billion dollar rescue bill.

The White House has now said it is ready to consider dipping into a 700-billion dollar Wall Street bailout agreed earlier this year to stimulate the economy and end a credit crunch.

But the Detroit Free Press newspaper reported that the size, scope and timing of any lifeline to the automakers was uncertain.

The White House was interested in two conditions, the paper said. The first was a steep reduction by creditors in automakers' debt, the second was requiring the United Auto Workers (UAW) union to take half the money due for a retiree health-care trust fund in stock, instead of in bonds or cash.

The Wall Street Journal reported Monday that the US government was planning a package of between 10 and 40 billion dollars.

According to the size of the deal, the administration may have to seek congressional approval, with the new Congress not set to meet again until January 6 with a boosted Democratic majority following the November 4 elections.

Republican Senator Bob Corker, who was the Senate's pointman for a series of adjustments to the House of Representatives' bailout bill, said the UAW must make pay adjustments.

"Every car they make, they're at a competitive disadvantage because they are disadvantaged by their labor costs," Corker said Sunday.

In turn, auto representatives accused Republicans of seeking to impose unfair wage cuts.

"We need this money ... this low-interest bridge loan to get us through an emergency situation here, an economic downturn," UAW chief Ron Gettelfinger told CNN, accusing Republicans of politicizing the issue by calling for US manufacturers to bring their pay in line with foreign automakers.

The United Auto Workers union is in talks with some of Detroit's Big Three auto makers

DETROIT -- The United Auto Workers union is in talks with some of Detroit's Big Three auto makers to stop a program that pays idled workers, people familiar with the matter said.

The so-called jobs banks, while shrinking, have been viewed by critics as a competitive disadvantage for Detroit auto makers, calling them an overly generous benefit at companies that are posting billions in losses. Union officials and their allies counter that the banks have been an effective way to keep a flexible job pool available and have allowed the companies to implement new technology while reducing overall numbers responsibly.

Labor leaders and auto makers insist that the much-criticized program to pay idled workers has been dwindling away on its own, thanks to new, stricter terms under the current union contract. The size of the revamped program, which pays nonworking employees almost their full wages at General Motors Corp., Ford Motor Co. and Chrysler LLC, has dropped to about 3,000 hourly employees, according to the companies. That's down from 15,000 workers just two years ago, a trend largely driven by time restrictions put in place as part of current union contracts. There are about 1,400 workers in the Ford jobs bank, 1,000 at GM and 500 at Chrysler.

But while officials at Ford expect that the number of employees in its jobs bank will decrease by a third by year end, the numbers will likely swell at GM in the near term because of a new round of cutbacks that have reduced the number of shifts at some plants and closed other facilities faster than expected.

Elimination of the jobs bank isn't likely to be a part of the business plans that the auto makers will submit to Congress this week, when they head back to Washington in an effort to secure billions in emergency loans. But people familiar with the matter at GM said the union has put the issue on the table for discussion. (The Big Three left Washington last month without the $25 billion loan package they were seeking and will return this week with the goal of proving that, with government assistance, they will be viable in the long-term.)

UAW officials, including its president Ron Gettelfinger, are said to understand that they are under pressure to deliver cost concessions. Mr. Gettelfinger "understands the UAW is part of the solution here," a person close to the UAW president said. "He doesn't want to be characterized as the problem." A spokesman for the union declined immediate comment.

The topic is so politically sensitive that Mr. Gettelfinger sought to define the issue last month before members of Congress had a chance to criticize it. "Since September of 2005 through September of 2008, we have lost 47,000 workers at General Motors. By the same token, during that period of time and with that loss, we have all but virtually eliminated our jobs banks at all three companies," Mr. Gettelfinger told a Senate panel. "We recognize that in order for these companies to be competitive, we had to make the tough calls."

During the past three years, the UAW agreed to eliminate tens of thousands of union jobs, reduce health-care coverage for union retirees and cut wages for new hires. Those moves essentially leveled the future playing field between the Big Three auto makers and their foreign-owned rivals in terms of labor costs.

—John D. Stoll and Kate Linebaugh contributed to this article.

Write to Matthew Dolan at matthew.dolan@wsj.com