An 'orderly' auto bankruptcy?

WASHINGTON (AP) - The Bush administration is looking at "orderly" bankruptcy as a way to deal with the desperately ailing U.S. auto industry, the White House said Thursday as carmakers readied more plant closings and a half million Americans filed new jobless claims.

With Detroit anxiously holding its breath and waiting for federal help, White House press secretary Dana Perino said, "There's an orderly way to do bankruptcies that provides for more of a soft landing. I think that's what we would be talking about."

President George W. Bush, asked about an auto rescue plan, said he hadn't decided what he would do.

But he, like Perino, spoke of the idea of bankruptcies organized 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."

The Big Three automakers said anew that bankruptcy wasn't the answer, and House Speaker Nancy Pelosi said on Capitol Hill that grim new unemployment data heightened the urgency for the administration "to prevent the imminent insolvency of the domestic auto industry."

The California Democrat said Bush has the legal authority to act now, and should attach the same accountability standards included in a $14 billion House-passed and Bush-supported carmaker bailout that died in the Senate last week. That plan would have given the government veto power over major business decisions at any car company that received federal loans.

"With 2 million American jobs riding on the outcome, the administration should provide this assistance with tough accountability standards and an insistence on shared sacrifice," Pelosi said. She spoke after the government announced that initial claims for unemployment benefits totaled a seasonally adjusted 554,000 last week.

Congressional aides in both parties who have been closely following the auto bailout discussions suggested the talk of bankruptcy could be a negotiating tactic to try to extract more hefty concessions from the companies and autoworkers unions in exchange for granting short-term loans out of a $700 billion Wall Street rescue fund.

And Perino said one of the factors preventing an announcement from the administration so far is that negotiations continue between the administration and the various sides that would have to sign on to a managed bankruptcy - entities such as labor unions and equity holders in addition to the companies themselves.

"In any scenario that comes forward after this decision-making process, all those stakeholders are going to have to make tough decisions," she said.

The comments in Washington came a day after Chrysler LLC announced it was closing all its North American manufacturing plants for at least a month as it, General Motors Corp. and Ford Motor Co. await word on government action. General Motors also has been closing plants, and it and Chrysler have said they might not have enough money to pay their bills in a matter of weeks.

Prices of GM and Ford stocks were down sharply Thursday after the remarks out of the White House. Ford, unlike General Motors and Chrysler, is not seeking billions of dollars in federal bailout loans, but a collapse of the other two would be expected to badly damage Ford as well.

Spokesmen for Chrysler, GM and Ford generally deferred to their previous comments that bankruptcy was not a workable solution. The car companies argue that no one would buy a vehicle from a bankrupt company for fear that it might not be around to honor warranties.

"We continue to work with the administration to find a solution to this liquidity crisis," said GM spokesman Tony Cervone.

Chrysler spokeswoman Shawn Morgan would not comment, deferring to previous statements against bankruptcy by CEO Robert Nardelli. Financing for even a prepackaged bankruptcy would be difficult to get in the current tight credit market, Chrysler has said.

Ford spokesman Mark Truby said the company is in a different position, having borrowed enough money to stay afloat through 2009.

Bush said the auto industry is "obviously very fragile" and he is worried about what an out-and-out collapse without Washington involvement "would do to the psychology" of the markets.

"There still is a lot of uncertainty," he said.

At the same time, the president said anew that he is worried about "putting good money after bad," meaning taxpayer dollars shouldn't be used to prop up companies that can't survive the long term.

He revealed one other consideration - that Barack Obama will become president in just over a month.

"I thought about what it would be like for me to become president during this period. I believe that good policy is not to dump him a major catastrophe on his first day in office," Bush said.

At the White House,