Momentum is building in Washington to aid wounded U.S. automakers with cash to help their finance arms and possibly even money to help seal a deal for General Motors Corp. to acquire Chrysler LLC.
The U.S. Department of Energy is trying to free up $5 billion of a $25 billion federal loan package to help make the GM-Chrysler deal work, The Wall Street Journal reported on its Web site Monday.
And the White House said Monday that the financing arms of the automakers might be eligible for federal help under the bank stock-purchasing portion of the $700 billion financial rescue package.
Officials "at the highest levels" of the Treasury, Energy and Commerce departments have talked to top automaker executives on the topic, presidential spokeswoman Dana Perino said.
"It's a possibility that they could qualify under it," she said.
It would be up to Treasury to determine whether any of the automaker financing arms could qualify, she said. GMAC Financial Services, Chrysler Financial and Ford Motor Credit Co. all could be eligible.
Also, Perino said that administration is "working as quickly as we possibly can" to finalize the regulations necessary to release the $25 billion in congressionally approved loans to automakers, designed to develop new energy efficient technology but is seen as a way to help keep the companies afloat amid hard times. She wouldn't put a specific time frame on it.
She also wouldn't rule in or out any further federal aid, beyond the loans, to stave off bankruptcy by any of the U.S. automakers.
All three automakers are burning up cash as the U.S. auto market downturn continues with no end in sight. Analysts say GM and Ford are spending more than $1 billion per month more than they bring in, while Chrysler's figures are unknown because it's a private company. Analysts say GM could reach its minimum operating cash level of $14 billion sometime next year. GM's sales are down 18 percent, and the company has lost $57.5 billion in the past 18 months, although much of that comes from noncash tax accounting changes.
The government has an interest in making sure automakers survive because of huge pension plans that it would have to insure, and the huge number of jobs that could go away if one of the companies goes bankrupt.
Chrysler employs about 49,000 in the U.S. and has roughly 125,000 pensioners. GM has 177,000 U.S. workers and around 500,000 people receiving pensions.
For each auto manufacturing job, there are 7.5 jobs with parts makers and other companies, according to the Center for Automotive Research in Ann Arbor. Chrysler alone accounts for 318,500 to 392,000 jobs, while GM and Ford account for 2 million each, the center said.
David Cole, the center's chairman, said the industry may need $15 billion to $20 billion in unrestricted federal aid to stay afloat long enough to outlast the economic downturn and take advantage of an auto sales resurgence.
"You're looking at a rather nominal amount compared to the cost of a failure," Cole said. "You have to look at that as a good investment, an old ounce of prevention is worth a pound of cure."
He estimated that it could cost the government more than $100 billion if GM or Ford go into bankruptcy from pension obligations and the loss of people paying income taxes and instead receiving government benefits.
Nate Bailey, spokesman for Republican U.S. Rep. Joe Knollenberg, whose district includes Chrysler's Auburn Hills headquarters, said Knollenberg has been in touch with auto executives and the administration to "ensure the auto companies get everything that they need to protect jobs and move forward."
He would not comment on whether they had discussed aid to help make the merger happen.
Industry analysts say Chrysler apparently is in the most dire condition of the Detroit Three automakers, and its owner, Cerberus Capital Management LP, is in talks with GM, the combined Nissan Motor Co. and Renault SA, and others about selling the company. A person briefed on the negotiations has said it Chrysler could be sold as a whole to one company or separated and sold in pieces. The person didn't want to be identified because the talks are private.
Cash-starved GM is said to be interested in Chrysler's roughly $11 billion stockpile of money. But further government funding may be needed for GM to take on the struggling automaker, which has few big-selling products and has seen sales drop 25 percent through the first three quarters of the year.
A GM acquisition of Chrysler could cost 30,000 or more Chrysler jobs because GM already has too many factories, employees, models and brands. GM would be forced to eliminate duplication in order to quickly save cash, and may be interested only in Chrysler's minivans and the Jeep brand, industry analysts have said.
An acquisition, though, may help the remaining automakers by giving them more sales, cutting excess factory capacity and allowing them to raise prices, something they haven't been able to do because of competition, Cole said. It also could save some Chrysler jobs, he said.
"It's not good to lose jobs, but it's a whole lot better to lose a few thousand jobs than to have these companies go down," Cole said. "It's a trade-off."
Associated Press White House Correspondent Jennifer Loven and Associated Press Writer Ken Thomas in Washington contributed to this report.