Bush, Paulson bailing on automakers?

The Bush Administration has said it would consider immediate aid for the Detroit automakers if Congress approves it, but does not want to tap the $700 billion included in the Emergency Economic Stabilization Act. According to White House spokeswoman Dana Perino, that program was designed to help financial institutions and there was no specific discussion about helping auto companies as part of that plan.

However, according to a report in the Detroit News, that is at odds with information supplied to at least one legislator. Prior to the September Congressional approval of the Wall Street bailout, the Treasury Department sent a letter to Michigan Representative Joe Knollenberg saying automakers were eligible for funds from the program if Treasury Secretary Henry Paulson and the Federal Reserve certified that such action was necessary to stabilize the economy. The Michigan congressional delegation wrote a letter to Paulson on Monday, asking him to use his authority to “provide emergency assistance to the domestic automobile industry.” Last week, Nancy Pelosi, Speaker of the House, and Harry Reid, Senate Majority Leader, also contacted Paulson in support of aid for the Detroit automakers.

Representative John Dingell, chairman of the House Energy and Commerce Committee, has asked why the administration gave troubled insurer AIG additional money, but would not help the U.S. auto industry. The extra $27 billion the Treasury just funneled into AIG is more than the total amount of emergency funding requested by all three car makers.

While President Bush and President-elect Obama discussed the challenges facing the industry in their meeting on Monday, the current resident of the White House seems to be content to pass the problem along to his successor. President Bush and Secretary Paulson have consistently opposed more financial aid for the auto industry beyond the Department of Energy’s $25 billion program of low-cost loans to retool factories and produce more fuel-efficient vehicles.

The DoE loans present a pair of problems for automakers: They can’t be used to fund operations and there is some question as to whether the companies can meet the financial viability requirements. Chrysler, Ford and General Motors are all in precarious positions because of their cash burn and the turmoil in the automotive and financial markets.

The Detroit News says Chrysler applied for a loan under the program, though there were no details about the size of the request. Ford has not yet put in an application and GM isn’t likely to apply until the end of this month.