His re-election campaign is launching a new television ad in the state on Friday highlighting the revival of General Motors and Chrysler following a multibillion-dollar federal bailout.

The ad notes that none of the Republican presidential hopefuls supported federal intervention and that Mitt Romney once penned a column titled “Let Detroit Go Bankrupt.”

Romney and rival Rick Santorum are locked in a tight contest in Michigan, which votes Tuesday. The contest has become a must-win one for Romney, a Michigan native whose father was an auto company executive and governor of the state.

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For decades, the United States has gradually shifted from creating goods to providing services. Fifty years ago, a third of U.S. jobs were in manufacturing. Now they account for just 9 percent, according to the Bureau of Labor Statistics. A manufacturing renaissance is being preached both from the White House, on the GOP campaign trail and in Super Bowl commercials.

Economists suggest plans to help boost manufacturing jobs may make more political sense than economic sense.

Obama’s prescription for a manufacturing comeback will be fleshed out in the new budget he submits on Monday. He is proposing tax incentives to companies that move their overseas operations back to the United States, along with tax penalties for those that don’t, more training and additional education.

But few of his ideas are likely to be enacted in this highly-charged election year.

Since the recession officially ended nearly 2 1/2 years ago, manufacturing production has increased 15 percent, helped by the replacement of aging equipment and software and strong demand from foreign markets. But Federal Reserve Chairman Ben Bernanke told Congress this week that the rebound might not last: “More recently, the pace of growth in business investment has slowed, likely reflecting concerns about both the domestic outlook and developments in Europe.”

There are political overtones to Obama’s State of the Union appeal for “an economy that’s built to last, an economy built on American manufacturing.” Polls show support for the president has slipped in Rust Belt battleground states he won in 2008.

Helping manufacturers recover is also being talked up by Republican presidential contenders, who all blame Obama’s policies for contributing to the decline.

Former Sen. Rick Santorum wants to eliminate the U.S. corporate tax completely for manufacturers, saying it would help put “men and women in this country who built this country back to work.” Mitt Romney’s get-tough rhetoric on China appears to be winning attention from workers and former workers in industries that have lost jobs to China. The former Massachusetts governor promises “to make America a more attractive place for manufacturers to invest.” Former House Speaker Newt Gingrich says we “badly need to rebuild our manufacturing base,” promoting job creation in the defense, energy and space industries.

This heavy attention on manufacturing may be misplaced, economists suggest.

“The vast majority of jobs in the future are going to be created in the service sector, not the manufacturing sector,” said Nigel Gault, chief U.S. economist for the consulting firm IHS Global Insight. He said he thought it was “a bit misleading” to focus so much on manufacturing.

“I’m not sure why manufacturing rather than any other industry warrants tax incentives,” Gault added.

Obama’s plan would:

- Prevent U.S. companies from deducting moving expenses when they shift production overseas, while offering a 20 percent moving-expense tax credit for businesses returning to the U.S.

- Establish a new trade enforcement unit.

- Modify a tax credit for domestic production to make it apply more narrowly to manufacturing.

- Extend $5 billion in new tax credits for clean-energy companies.

- Reduce the nominal maximum 35 percent corporate tax, most likely taking it down to the high 20s. He also may propose a minimum tax on overseas profits.

Obama also has called for a minimum 30 percent tax rate on annual incomes of more than $1 million. Business interests claim it could harm small and medium-sized manufacturers who file tax returns as individuals.

Obama’s sharp focus on reviving manufacturing isn’t shared by all Democrats.

“Let’s not fool ourselves. We’re not going to have the kind of manufacturing-based economy we had 30 or 40 years ago,” says Robert Reich, labor secretary under President Bill Clinton. And Christina Romer, who headed the president’s Council of Economic Advisers from 2009-2010, says it is wrong to suggest that producing “real things” is more important than “services.”

“American consumers value health care and haircuts as much as washing machines and hair dryers. Our earnings from exporting architectural plans for a building in Shanghai are as real as those from exporting cars to Canada,” she wrote.

Jay Timmons, president of the National Association of Manufacturers, said his organization agrees with Obama in part, that “manufacturers are poised for a renaissance.”

“The good news is everybody is talking about manufacturing today. Even on the Super Bowl, you saw ad after ad referring to the promise and the potential of manufacturing in America,” he said. The bad news? It is still “20 percent more expensive to manufacture in the United States than it is anywhere else in the world,” Timmons said. Obama supporters argue his proposals would help make U.S. factories more competitive.

One much-discussed Super Bowl ad was a Chrysler spot featuring actor Clint Eastwood that celebrates Detroit, suggesting it was near collapse until the residents “all pulled together.” Eastwood implores the nation to do the same. Some Republicans called the spot a valentine to Obama’s auto bailout. Eastwood insists it was apolitical.

Despite the job losses, the U.S. remains an exporting powerhouse, right behind No. 1 China and vying with Germany for the No. 2 rank. U.S. factories have steadily become more advanced and automated, requiring only a fraction of the workers previously needed.

Yet, China is beginning to take some market share from the U.S. in exporting advanced products and equipment, said a report by the U.S. Business and Industry Council, which represents mainly family-owned companies.

“These findings demolish the still-widespread view that Chinese economic competition can be safely downplayed because it’s largely confined to cheap consumer goods,” council official Alan Tonelson said.

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For Obama, the auto bailout is a case study for his efforts to revive the economy and a potential point of contrast with Republican Mitt Romney, who opposed Obama’s decision to pour billions of dollars into the auto companies. The president’s campaign views the auto storyline as a potent argument against Romney, the son of a Detroit auto executive who later served as Michigan governor.

If Romney wins the GOP nomination, expect to hear a lot about the car industry.

“The American auto industry was on the verge of collapse. And some politicians were willing to let it just die. We said no,” Obama told college students last week in Ann Arbor, Mich. “We believe in the workers of this state.”

Obama was expected to visit the Washington Auto Show on Tuesday, giving him another forum to talk about GM and Chrysler, along with the administration’s attention to manufacturers and efforts to boost fuel efficiency standards. The White House has taken every opportunity to highlight its efforts to rebuild the auto industry, pointing to GM’s reemergence as the world’s largest automaker and job growth and profitability in the U.S. auto industry.

As the industry was collapsing in the fall of 2008, the former Massachusetts governor predicted in a New York Times op-ed that if the companies received a federal bailout, “you can kiss the American automotive industry goodbye.” Romney said the companies should have undergone a “managed bankruptcy” that would have avoided a government bailout.

“Whether it was by President Bush or by President Obama, it was the wrong way to go,” Romney said at a GOP presidential debate in Michigan in November. Romney said the nation has “capital markets and bankruptcy – it works in the U.S. The idea of billions of dollars being wasted initially, then finally they adopted the managed bankruptcy. I was among others that said we ought to do that.”

Both the Bush and Obama administrations found themselves in uncharted territory in the fall of 2008 and early 2009. GM and Chrysler were on the verge of collapse when Congress failed to approve emergency loans in late 2008. Bush stepped in and signed off on $17.4 billion in loans, requiring the companies to develop restructuring plans under Obama’s watch.

The following spring, Obama pumped billions more into GM and Chrysler but forced concessions from industry stakeholders, enabling the companies to go through swift bankruptcies. Obama aides said billions in aid – about $85 billion for the industry in total – was necessary because capital markets were essentially frozen at the time, meaning there was no way for GM and Chrysler to fund their bankruptcies privately.

Without any private financing or government support, they argued, the companies would have been forced to liquidate.

Three years later, Obama is trying to turn the tough decision into a political advantage in Ohio and Michigan, which Obama carried in 2008 and where unemployment has fallen of late. During last week’s State of the Union address, Obama said the auto industry had hired tens of thousands of workers, and he predicted the Detroit turnaround could take root elsewhere.

Yet Obama’s poll numbers in places like Ohio and Michigan remain in dangerous territory, under 50 percent, and the auto industry argument carries some inherent risks.

A Quinnipiac University poll in Ohio released Jan. 18 found Obama locked in a virtual tie with Romney in a hypothetical matchup, with about half the voters disapproving of Obama’s performance as president. A poll in Michigan released last week by Lansing-based EPIC-MRA found 48 percent supporting Obama and 40 percent backing Romney in a potential matchup.

Republicans say the bailout still remains unpopular and the government intervention was hardly a cure-all. “The industry was bailed out but a lot of people lost their jobs,” said David Doyle, a Michigan-based Republican strategist.

In a nation still soured on bailouts, the government owns more than a quarter of GM. The Treasury Department estimates the government will lose more than $23 billion on the auto bailout: GM is trading at $24 a share, well below the $53-per-share mark needed for the government to recoup its investment in the company.

Romney, facing attacks from Democrats on his work at private equity firm Bain Capital, has tried to use the GM and Chrysler cases to insulate himself against charges his firm gutted companies and fired workers. “How did you do when you were running General Motors as the president?” Romney said in a December debate. “Gee, you closed down factories. You closed down dealerships. And he’ll say, well I did that to save the business. Same thing with us, Mr. President.”

Obama, Vice President Joe Biden and others say the decision, while unpopular, saved an estimated 1 million jobs throughout the Midwest and say the industry is coming back.

As a result of the restructuring, the companies can make money at far lower U.S. sales volumes than in the past. Industry analysts predict U.S. sales will grow by at least 1 million this year over last year’s 12.8 million units as people replace aging cars and trucks. And North American operations at GM, Chrysler and Ford are thriving, boosting their companies’ earnings – all signs that Democrats say will make the difference in the Midwest.

“I don’t know how any reasonable person can fail to acknowledge that this rescue plan worked and the country has benefited,” said former Ohio Gov. Ted Strickland, a Democrat.

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Chrysler, the last of the three to return to profitability, said Monday it made a $116 million net profit in the first quarter on revenues of $13.1 billion.

The company, which emerged from bankruptcy protection a little less than two years ago, hadn’t reported a net profit since 2006.

The announcement marked another chapter in the Detroit auto industry’s long comeback.

General Motors Co., which also went into bankruptcy in 2009 and took billions in government aid, has four profitable quarters under its belt and held an initial public offering in November to help repay its loans. Ford Motor Co., which didn’t take bailout money but nearly filed for bankruptcy five years ago, reported its eighth consecutive quarterly profit last week. Ford’s 2010 profit of $6.6 billion was the highest in a decade.

Several trends put the companies back in the black. Sales are rising as the economy improves, and each of the automakers has released popular new vehicles. All cut staff, plants and wages during the economic downturn. The Detroit Three are also taking customers away from rivals like Toyota Motor Corp., which was hurt by safety recalls last year and the recent Japanese earthquake. Chrysler’s sales rose 18 percent worldwide in the first three months of 2011.

“We are very pleased with the results,” Chrysler CEO Sergio Marchionne said in a conference call with media and analysts. “More than the numbers, I think they indicate that we are on the right path.”

Staying on that path is crucial for Chrysler, which hopes to hold a public offering later this year or early next. But investors want to see a string of profitable quarters before that happens.

New trucks and cars are helping the bottom line. U.S. sales of the revamped Jeep Grand Cherokee SUV jumped 64 percent in the latest quarter, while sales of the Chrysler 200 sedan more than quadrupled over those of its predecessor, the poorly rated Sebring.

Even better, buyers were willing to pay more for Chrysler’s vehicles. The average price paid per vehicle rose $1,000 to $28,300. Chrysler cut its spending on costly incentives and reduced the number of vehicles going into low-profit rental fleets.

GM, Ford and Chrysler all reported profits in the last quarter of 2004, but GM and Ford soon tumbled into the red. Chrysler last reported a net profit in the second quarter of 2006, one year before it was sold by Daimler AG to private-equity firm Cerberus Capital Management.

Cerberus didn’t invest the cash needed to weather the worst auto sales decline in more than 25 years. As a result, Chrysler came close to running out of money at the end of 2008. The U.S. government stepped in, authorizing $10 billion in aid and appointing Marchionne to run the company after it emerged from bankruptcy protection in June 2009.

The U.S. government remains a part owner of Chrysler, holding an 8.6 percent stake. But Chrysler wants to sever those ties.

In the second quarter, the company plans to repay $7.5 billion of the bailout from the U.S. and Canadian governments using a new, $3.5 billion bank loan, a $1.5 billion credit facility and a $2.5 billion debt offering. By repaying the debt, Chrysler will save millions in interest payments.

The U.S. government is also expected to recoup some of the bailout money when it sells its stock in the public offering.

But Chrysler isn’t out of the woods. The company still depends on sales of trucks and SUVs at a time when gas prices have hit $4 a gallon in 13 states plus the District of Columbia, a trend that will likely hurt sales of larger vehicles. The company doesn’t have a hybrid or a small car that gets 40 miles per gallon, as competitors Hyundai, Ford, General Motors and Toyota do.

Marchionne said the company has improved fuel economy by a combined 40 percent on its 2011 models. It also plans a significant shift to more efficient engines over the next three years, using technology from its partner, Italian automaker Fiat SpA.

Another setback has been the U.S. rollout of the Fiat brand, which the company hoped would lure more American to stylish small cars such as the Fiat 500.

Fiat sold just 500 of the subcompacts in the first quarter, putting it behind where it expected to be. Marchionne said it has taken longer than expected for dealers to get state licenses to sell the cars. Fewer than 50 of the planned 130 U.S. Fiat dealers are now open. The company had hoped to sell 45,000 Fiats here in 2011.

Marchionne acknowledged that the company has a long way to go before it’s completely healthy.

“Success is incredibly temporary. The first quarter is done, but we’ve got a lot of quarters to do,” he said.

That’s not keeping him from feeling bullish about Chrysler. Last month, Fiat, which is also run by Marchionne, gave Chrysler a vote of confidence when it said it will spend $1.3 billion to raise its stake in the American company. That will increase Fiat’s holdings from 30 percent to 46 percent. Fiat hopes to control 51 percent of Chrysler by the end of this year.

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DETROIT — As more U.S. buyers head back into auto dealerships, automakers are jostling for their attention with sweetened deals.

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The major automakers knocked a little extra off sticker prices in February, giving additional momentum to a recovery in sales that started last year. The good news for buyers is that discounts are likely to continue into the spring, as older models like the Toyota Corolla and Chevrolet Malibu duke it out with newer models like the Ford Focus and Hyundai Elantra.

“Sales rates are starting to exceed expectations. It’s an opportunity to grab sales from others if you’re aggressive enough and you have the right product,” said Jesse Toprak, vice president of industry analysis at auto pricing site TrueCar.com.

All the major car companies reported double-digit gains for last month. Improving economic conditions and consumer confidence could mean more gains in the months ahead.

But automakers’ results came on a day when oil again approached $100 per barrel on continued unrest in the Arab world. Rising oil prices could still put a damper on the industry’s recovery, GM CEO Dan Akerson cautioned on the sidelines of the Geneva Auto Show.

“I don’t think the industry learned a lot of lessons from 2008. They will this time around,” Akerson said of the 2008 spike in U.S. gas prices to above $4 per gallon, which rapidly changed buying habits.

So far, gas prices aren’t having much impact on buying decisions. At AutoNation Inc., the country’s largest dealership chain, customers are increasingly considering fuel prices when they decide what model to buy. But there are other factors, said President and Chief Operating Officer Mike Maroone. The company sees the “freak-out point” that changes people’s car-buying behavior at $4.25 to $4.50 per gallon, he said.

“We’re still a long ways from that,” he said. The nationwide average for a gallon of regular gas Tuesday was $3.375, according to AAA.

Auto sales rose 27 percent in February as the economic recovery continued and consumers felt more comfortable taking on a car payment. The strongest showing came from General Motors Co. and Toyota Motor Corp. with increases of more than 40 percent.

The monthly sales rate, when adjusted for seasonal differences and projected out for a full year, was 13.4 million vehicles. That would make it the highest rate since the government’s Cash for Clunkers rebates juiced sales in the summer of 2009.

Discounts are one reason for the impressive sales.

Automakers had largely been able to wean themselves off deals, which hurt their profits, since the industry ran into financial trouble in 2009. But GM fell off the wagon in January, raising incentives by $400 per vehicle. Competitors followed in February, with Chrysler, Ford, Nissan and Toyota all increasing spending on incentives by 6 percent or more over the previous month, TrueCar estimated.

Chrysler Group offered zero-percent financing for 36 months on the new 200 sedan. GM offered $7,000 in dealer cash on the Cadillac DTS and STS sedans. Toyota put $4,000 on the hood of the 2010 Lexus HS hybrid.

Still, incentives are only part of the story.

“A $400 increase doesn’t drive these kinds of share gains and sales gains,” GM’s vice president of U.S. sales Don Johnson said.

Also in the mix is economic recovery, better auto loan availability, low interest rates, increasing consumer confidence and a return of leases, which were almost absent in February of last year because used-car values dropped so dramatically during the downturn. GM said 22 percent of its individual buyers were leasing in February, up from 15 percent in January.

“I would connect all the dots together,” said Paul Ballew, a former chief economist at GM who is now at insurance firm Nationwide.

Analysts don’t expect the incentive skirmish to reach a full-blown discount war. Detroit automakers have fewer factories and no longer have to offer huge amounts of cash on their cars and trucks to keep the plants going. GM, for instance, had average incentives of $4,750 per vehicle in March of 2009, its highest level in 10 years as it headed toward bankruptcy, according to Edmunds.com. Last month, incentives cost GM $3,849 per vehicle. Johnson said discounts should be lower as the year goes on.

Rising gas prices didn’t dampen Americans’ appetites for trucks and SUVs. GM said sales of its full-size pickup trucks rose 65 percent compared with February of last year, a sign that businesses are continuing to replace work trucks. Sales of Chrysler’s Ram truck brand rose 81 percent.

Crossovers like the Chevrolet Equinox — which saw sales jump 92 percent — also continued to be a force in the marketplace. Overall, GM saw a whopping 49 percent jump in sales compared with February of last year.

Toyota’s gain was similar, at nearly 42 percent. But sales in the comparable month were poor because of a string of highly publicized safety recalls. Toyota said it saw strong sales toward the end of the month as it launched its “Number One for a Reason” marketing campaign. The RAV4 crossover was up 85 percent, while the Camry — the top-selling car in the U.S. — was up 64 percent.

Ford’s 10 percent gain was the weakest among the major automakers. Ford said it cut low-profit sales to rental-car companies and didn’t resort to big incentives. One of its best performers was the new Ford Explorer, which saw sales more than double in the month.

“Consumers are going to place a value on each manufacturer’s product. Right now, they’re saying to us, with the incentives balancing out, we still want to be in a Ford,” said Ken Czubay, Ford’s vice president for U.S. sales.

Ford’s Lincoln luxury brand continued to struggle, with an 11 percent drop in sales. One car from Cadillac — the CTS — outsold all of Lincoln combined.

Other automakers reporting Tuesday:

— Chrysler said its sales rose 13 percent on strong sales of Ram trucks and the new Jeep Grand Cherokee.

— Nissan Motor Co. said its sales were up 32 percent. The Rogue small crossover was up 86 percent.

— Honda Motor Co. said sales were up 22 percent. The CR-V crossover saw a 61 percent gain, while the Fit subcompact was up 44 percent.

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Detroit — Though entertainment and sports superstars like Dale Earnhardt Jr. and Tiger Words have served as effective spokespersons for General Motors, the real stars of GM work behind the scenes and have engineered its renaissance and resurgence.

Rolling out spotlighted some of the major players who have led the automotive colossus through its metamorphosis, during which it has produced the iconic Camaro sports car, the Cadillac CTS V-Coupe and the technological marvel, the Chevy Volt.

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From Time.com:

One of the women who took Barack Obama on a tour of the Jeep Grand Cherokee assembly line Friday wore a t-shirt with the president’s image that read “Our Dreams Do Come True.” A few miles away, at the Hamtramck General Motors plant, workers brought in red-white-and-blue pom poms to celebrate his arrival. “It’s the savior of the company,” joked Dave NotariaOne of the women who took Barack Obama on a tour of the Jeep Grand Cherokee assembly line Friday wore a t-shirt with the president’s image that read “Our Dreams Do Come True.” A few miles away, at the Hamtramck General Motors plant, workers brought in red-white-and-blue pom poms to celebrate his arrival. “It’s the savior of the company,” joked Dave Notarianni, an electrician of 38 years for GM. “Barack, our boss.”

In terms of raw star power, it’s hard to top the U.S. President in an American auto factory these days. Not only is Obama, by dint of his job, the majority shareholder in GM and a major investor in Chrysler, he is quite literally both companies’ savior. “You did! You did! You did!” shouted the enthusiastic throng at GM, when Obama recounted his own decision to invest $60 billion in taxpayer money to prevent the dissolution of the two companies last year.

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Going before groups of autoworkers and union members, President Barack Obama is trying Tuesday to assure blue-collar audiences that the economy is coming back — and that his administration deserves credit for saving some of their jobs.

Obama is scheduled to meet with workers at the General Motors Lordstown assembly plant near Youngstown, Ohio, where GM recently was able to start a second production line because of demand prompted by the federal Cash for Clunkers program.

Later, the president addresses the AFL-CIO convention in Pittsburgh, where he will urge the nation’s largest labor union to support his health care overhaul.

“We didn’t come here (to Washington) just to respond to crises; we came here to address America’s prosperity in the future, and I think that’s what he’ll outline,” White House spokesman Robert Gibbs told reporters Monday, previewing the president’s message.

Obama planned to leave Washington early Tuesday morning for a quick trip to the Lordstown plant, in the economically depressedMahoning Valley in northeastern Ohio. He is expected to tell a crowd of GM workers that Washington programs are putting workers back on the job.

Demand from the temporary Cash for Clunkers program — which offered up to $4,500 for drivers to trade in gas guzzlers for more fuel-efficient models — allowed GM to restart a second shift at the Lordstown plant, bringing about 1,000 people back to work making the compact Chevrolet Cobalt.

Next year, the Lordstown plant will start building the Chevrolet Cruze, another compact vehicle.

In Pittsburgh, Gibbs said, Obama planned to tell AFL-CIO members how his health care proposals would help repair an economy that is inching toward double-digit unemployment.

The events are designed to be heavy on working-class appeal in hopes of boosting the White House‘s credentials with the middle-class voters so crucial to the president’s economic agenda.

Obama wraps up his daylong trip at a fundraiser for Pennsylvania Sen. Arlen Specter in Philadelphia. He is expected to tell donors that Specter, who earlier this year switched from the GOP to the Democratic party, is crucial for pushing through a White House agenda that seems to have lost steam in recent weeks.

The Obama administration will end the popular $3 billion Cash for Clunkers program on Monday, giving car shoppers a few more days to take advantage of big government incentives.

The Transportation Department said Thursday that the government will wind down the program on Monday at 8 p.m. EDT. Car buyers can receive rebates of $3,500 or $4,500 for in older vehicles for new, more fuel-efficient models.

Transportation Secretary Ray LaHood said the program has been “a lifeline to the automobile industry, jump starting a major sector of the economy and putting people back to work.” He said the department was “working toward an orderly wind down of this very popular program.”

The White House has touted the program’s success in providing a targeted boost to the sluggish economy since its inception in late July. Through Thursday, auto dealers have made deals worth $1.9 billion and the incentives have generated more than 457,000 vehicle sales.

But the administration needed to put a halt to the program to avoid surpassing the $3 billion funding level. Consumers were on pace to exhaust the program’s coffers in early September and dealers have complained about long delays in getting reimbursed for the car incentives.

John McEleney, chairman of the National Automobile Dealers Assocation, said he remained concerned that so few dealers had been reimbursed for Clunker deals. But he said the Monday deadline should give dealers time to get their paperwork in order.

“I think if we can get a clean cutoff Monday and get everything processed by then, it will have been a pretty darned successful program,” he said.

But Mike Mahalak, who runs a Dodge, Chrysler and Jeep dealership in Winter Haven, Fla., said the Monday end date could lead to a similar rush that nearly crippled the federal government’s computer systems that were set up to handle claims.

“That Web site will lock up again once everyone is cramming it again on Monday,” Mahalak said. The administration has said it expanded the capacity of the computer network in an effort to improve the process for dealers.

The Transportation Department said they have reviewed nearly 40 percent of the transactions and have already paid out $145 million to dealers. Obama officials said there are no plans to seek additional funding.

Applications for rebates will not be accepted after the Monday deadline, administration officials said, and dealers should not make additional sales without receiving all the necessary paperwork from their customers. Dealers will be able to resubmit rejected applications after the deadline.

The Transportation Department cautioned dealers about making sales this weekend, advising them to make sales only when the buyer’s paperwork is clearly in order and can be submitted immediately for repayment.

President Barack Obama said in an interview Thursday that the program has been “successful beyond anybody’s imagination” but dealers were overwhelmed by the response of consumers. He pledged that dealers “will get their money.” The administration has said it has tripled the number of staffers sorting through the dealer paperwork.

Dealers have complained of delays in getting reimbursed and backlogs of vehicle paperwork getting processed in the program. Dealers have said they face a risk of not being reimbursed but LaHood has pledged that dealers will be paid.

“We do not know how many deals are in the pipeline. We don’t know how many dollars are left in the program at this very moment,” said Ted Smith, president of the Florida Automobile Dealers Association. “That’s fundamental to the health of the dealerships that are participating. If you run out of money before you run out of deals, that’s not a good situation.”

On Thursday, both Chrysler and General Motors said they would begin providing cash advances to dealers to help cover any cash shortfalls related to the program. The automakers said they would provide the advances for up to 30 days to dealers who have already completed a sale and that they will be available as long as the program remains in effect.

The National Automobile Dealers Association said its trade group met with Transportation officials to discuss concerns about reimbursement delays and ways of fixing the problems. NADA spokesman Charles Cyrill said the association “stressed the importance of addressing — as soon as possible — how the program will end, including the possible suspension of the program.”

Dealer say the delays have led to a cash crunch. They typically borrow money to put new cars on their lots and must repay those loans within a few days of a sale.

Some dealers are no longer participating in the Clunker program. The Greater New York Automobile Dealers Association, which represents dealerships in the New York metro area, said about half its 425 members had left the program because they cannot afford to offer more rebates.

Still, the program provided at least a temporary jolt for automakers.

GM announced plans to rehire more than 1,300 workers and automakers have been paying overtime to boost production. Hyundai recalled 3,000 workers in Alabama.

“At a time of great economic distress, cash for clunkers has stimulated increased production by domestic automakers, putting thousands of idled workers back on the job,” said Rep. John Dingell, D-Mich.

The government’s online reimbursement system was flooded with requests shortly after the program began in late July, overwhelming the computer system and staff set up to process the deals. That led to big delays for dealers trying to file the paperwork they needed to get paid back for the rebates.

LaHood said some of the submitted paperwork has been incomplete or inaccurate, which contributed to delays. He acknowledged the Transportation Department did not have enough people to process the paperwork but said DOT was ramping up staff.

Damon Winter, The New York Times

From NYTimes.com:

The Pontiac Assembly Center in Pontiac, Mich., is a massive, low-slung structure of concrete and corrugated green steel that squats conspicuously among the many strip malls that line one of the city’s main thoroughfares, South Opdyke Road. Locals refer to the three-million-square-foot factory, which makes Chevrolet Silverado and GMC Sierra pickup trucks, as Plant 6, because when it opened in 1972, it was the sixth General Motors manufacturing facility in this city, 25 miles north of downtown Detroit. At the time, General Motors was the world’s largest automaker. It dominated the American market, manufacturing half of the vehicles sold in the U.S. As recently as 2003, Plant 6 was running three consecutive eight-hour shifts, employing 3,000 people and making 1,300 trucks a day.

Today, Pontiac Assembly is the city’s last working auto-assembly plant, and like many of America’s car factories, it is operating at a greatly diminished capacity.

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A day after Chrysler LLC told a quarter of its dealers that it won’t renew their contracts, owners of General Motors Corp. dealerships are awaiting word on whether they will be next.

GM said it will notify 1,100 U.S. dealers on Friday that their franchise agreements will not be renewed. Dealers expect to hear either by telephone or FedEx letters that will begin arriving Friday morning.

The cuts will come just a day after crosstown rival Chrysler announced it was dropping 789 of its roughly 3,200 dealerships by around June 9. Both companies have too many dealerships for too few sales are slashing costs as they race to restructure.

The GM dealer cuts are likely to have a much greater impact than Chrysler’s. While many Chrysler dealers also sell other brands and will stay open after losing their franchises, a large number of GM dealers sell only GM vehicles. So if their franchises are revoked, they run a greater risk of closing for good.

In both cases, the cuts will cost thousands of jobs, create holes in local tax bases, eliminate community pillars and create economic ripple effects across the country.

Chrysler is operating under bankruptcy protection, so it is likely to have an easier time tearing up its franchise agreements with its dealers than GM. A hearing is scheduled for June 3 in U.S. Bankruptcy Court in New York for the judge to determine whether to approve Chrysler’s motion to fire its dealers.

Chrysler executives said Thursday the company is trying to preserve its best-performing dealers and eliminate ones with the weakest sales. More than half of the dealerships being eliminated sell less than 100 vehicles per year, they said, and account for 14 percent of U.S. sales.

The National Automobile Dealers Association says about 40,000 people work at the affected Chrysler dealerships. Many will keep their jobs, but their dealerships will be left to sell only the other brands in their showrooms or used cars.

The NAACP has fought for a century to bring equal and civil rights to blacks, but the Rev. Jesse Jackson believes the organization’s current battle is to help the troubled U.S. economy and struggling domestic auto industry.

“We must now save the entire industry from itself,” Jackson said as part of the keynote address Sunday night at the Detroit NAACP’s 54th Fight for Freedom Fund Dinner at Cobo Center.

“We cannot have joy while Chrysler is in bankruptcy and GM is in line. There is a sense of joy because it’s high noon in our politics, but it’s midnight in our economy.”

The civil rights activist and Operation PUSH founder had said earlier at a media gathering that the employment picture in Detroit, among the cities hardest hit by withering economy, has shifted from “the Big Three to gambling casinos.”

“Detroit is not just your city,” Jackson later told the crowd during his speech. “It is the soul of industrial America.

“We must fight back to save GM, Ford and Chrysler. That’s our lifeline.”

Chrysler, the nation’s third-largest automaker behind General Motors Corp. and Ford Motor Co., filed for Chapter 11 bankruptcy protection Thursday after months of surviving on government loans. All three car companies have laid off thousands of workers and closed a number of factories in the Detroit area and across the country.

Detroit has mirrored their failures. The city’s poverty and unemployment are among the highest in the country, as is its home foreclosure rate.

The city’s population is more than 80 percent black. Detroit’s black residential base began swelling decades ago as blacks from the south moved north to find jobs in manufacturing and in the auto industry, still the lifeblood of the city.

Those jobs must be saved, Jackson said in his 25-minute speech.

“The cause of the workers is a moral cause,” he said. “It’s time for a righteous rebellion, civil disobedience.”

Jackson also criticized federal bailouts to banks, who in turn gave million-dollar bonuses to executives while urban neighborhoods continue to suffer and jobs are being lost.

His message came at the right time, said 27-year-old Jonathan Guest of Detroit.

“We need to stand behind them and fight for them,” he said of the auto industry and its workers.

It all made sense, said Doris Jordan-Smith of Detroit.

The auto industry’s jobs crisis has affected others outside the car companies, said the 65-year-old insurance company marketer.

“We fought to get those jobs. We’ve got to fight to keep them,” she said.

Detroit NAACP president Wendell Anthony attributed the rise of the black middle class to the auto industry, which was honored at the dinner.

“Detroit is still the motor city capitol of the world,” Anthony said. “Standards have been set and innovations have been met.”

The United Auto Workers union and its president Ron Gettelfinger also were honored. Gettelfinger thanked the NAACP for its support for America’s auto workers.

GM Chief Executive Fritz Henderson spoke on behalf of GM, Ford and Chrysler.

“We recognize that most of us derived our livelihood from the auto industry, directly or indirectly,” Henderson said. “We’re all in this together.”

Singer Aretha Franklin, the Rev. Al Sharpton and Detroit pastor the Rev. Edwin Rowe also were honored for contributions to the civil rights movement.

President Barack Obama is sending a blunt message to Detroit automakers: To survive _ and win more government help _ they must remake themselves top to bottom. Driving home the point, the White House ousted the General Motors chairman as it rejected GM and Chrysler‘s restructuring plans.

Obama is set to elaborate on that message Monday when he announces what his White House told reporters over the weekend: Neither GM nor Chrysler submitted acceptable plans to receive additional federal bailout money.

GM chairman Rick Wagoner became the most conspicuous casualty of that decision, forced out Sunday as the White House indicated Detroit must make management and other changes if it hopes to survive _ and that the Obama administration will have a hands-on role in those changes.

Michigan Gov. Governor Jennifer Granholm said Wagoner “clearly is a sacrificial lamb” who stepped aside “for the future of the company and for the future of jobs.” She spoke on NBC’s “Today” show Monday.

Obama said the companies must do more to receive additional financial aid from the government.

“We think we can have a successful U.S. auto industry. But it’s got to be one that’s realistically designed to weather this storm and to emerge _ at the other end _ much more lean, mean and competitive than it currently is,” Obama said on CBS’ “Face the Nation” broadcast Sunday.

Frustrated administration officials, speaking on condition of anonymity ahead of Obama’s announcement, said Chrysler has been given a 30-day window to complete a proposed partnership with Italian automaker Fiat SpA. The government will offer up to $6 billion to the companies if they can negotiate a deal before time runs out. If a Chrysler-Fiat union cannot be completed, Washington plans to walk away, leaving Chrysler destined for a complete sell-off.

Shawn Morgan, a Chrysler spokeswoman, declined to comment ahead of Obama’s announcement.

For GM, the administration offered 60 days of operating money to restructure. Officials say they believe GM can put together a plan that will keep production lines moving in the coming years.

New directors will now make up the majority of GM’s board. Fritz Henderson, GM’s president and chief operating officer, became the new CEO. Board member Kent Kresa, the former chairman and CEO of defense contractor Northrop Grumman Corp., was named interim chairman of the GM board.

“The board has recognized for some time that the company’s restructuring will likely cause a significant change in the stockholders of the company and create the need for new directors with additional skills and experience,” Kresa said in a written statement.

The Obama administration move comes amid public outrage over bonuses paid to business leaders and American International Group executives _ set against a severely ailing economy.

GM failed to make good on promises made in exchange for $13.4 billion in government loans. Chrysler, meanwhile, has survived on $4 billion in federal aid during this economic downturn and the worst decline in auto sales in 27 years. In progress reports filed with the government in February, GM asked for $16.6 billion more and Chrysler wanted $5 billion more. The White House balked and instead started a countdown clock.

Two people familiar with the plan said bankruptcy would still be possible if the automakers failed to restructure. Those officials spoke on condition of anonymity because they were not authorized to make details public.

An exasperated administration official noted that the companies had not done enough to reduce debt; in some cases, it actually increased during this restructuring and review process. GM owes roughly $28 billion to bondholders. Chrysler owes about $7 billion in first- and second-term debt, mainly to banks. GM owes about $20 billion to its retiree health care trust, while Chrysler owes $10.6 billion.

GM and Chrysler employ about 140,000 workers in the U.S. In February, GM said it intended to cut 47,000 jobs around the globe, or almost 20 percent of its work force, close hundreds of dealerships and focus on four core brands _ Chevrolet, Cadillac, GMC and Buick.

From the New York Times:

DETROIT — Since millions of African-Americans began leaving Southern farms for Northern factories nearly a century ago in what is still known as the Great Migration, the destinies of many of them have been entwined with the auto industry’s.

The car companies were hardly multiracial utopias, but they, especially Ford, employed blacks when many industries would not. Through the decades, the automakers and their higher wage scales provided a route to the middle class for many blacks, especially those with limited education, and their children.

Now, with Detroit reeling, many blacks find their economic well-being threatened.

By last month, nearly 20,000 African-American auto workers had lost jobs, a 13.9 percent decline in employment, since the recession began last December, according to government jobs data analyzed by the Economic Policy Institute, a liberal Washington research firm. That compares with a 4.4 percent decline for all workers in manufacturing.

Click here to read entire story…

One measure of how tough times are in the Motor City: Some of the offenders in jail don’t want to be released; some who do get out promptly re-offend to head back where there’s heat, health care and three meals a day.

“For the first time, I’m seeing guys make a conscious decision they’ll be better off in prison than in the community, homeless and hungry,” said Joseph Williams of New Creations Community Outreach, which assists ex-offenders. “In prison they’ve got three hots and a cot, so they commit a crime to go back in and come out when times are better.”

For now, better times seem distant. Even with no hurricane or other natural disaster to blame, Detroit has – by many measures – replaced New Orleans as America’s most beleaguered city.

The jobless rate has climbed past 21 percent, the embattled school district just fired its superintendent, tens of thousands of homes and stores are derelict and abandoned, the ex-mayor is in jail for a text-messaging sex scandal. Even the pro football team is a pathetic joke – the Lions are within two losses of an unprecedented 0-16 season.

And overarching these and many other woes is the near-collapse of the U.S. auto industry, Detroit’s vital source of jobs and status for more than a century.

“We’re the Motor City,” said Scott Alan Davis, who oversees community development projects in one of the worst-hit neighborhoods. “When the basis for that name collapses, that’s started to scare people.”

Among the worried is 81-year-old Warlena McDuell, a retired surgical technician who shares a home with her cancer-stricken daughter. On a recent weekday, she was among hundreds of Detroiters, most of them elderly, filling orange-plastic grocery carts at a food bank run by Focus:HOPE, a local nonprofit.

“It’s a depression – not a recession,” McDuell said, with the authority of someone who has lived through both. “It will get worse before it gets better.”

Behind her in line, stocking up on canned apple juice and fruit cocktail, was Benjamin Smith, 77, who once held jobs with Uniroyal and Chrysler. Maneuvering his cart slowly, one hand gripping a cane, he was unable to muster much cheer when someone extended holiday good wishes.

“How are we going to do well?” he replied. “Everything’s busted up.”

Focus:HOPE’s food program serves 41,000 people a month; manager Frank Kubik estimates that’s only half the number of Detroiters in need of the assistance.

“It’s not going to be a nice Christmas for a lot of folks,” he said.

DeWayne Wells, president of Gleaners Community Food Bank of Southeastern Michigan, said demand is up by 25 percent from a year ago in the region’s food banks as auto-industry layoffs multiply.

“Many people are first-timers – they have no idea how to navigate the system, how to qualify for food stamps,” Wells said. “Last year, some were donors – now they’re clients.”

The roots of Detroit’s current plight go back decades. Court-ordered school busing and the 12th Street riots of 1967 accelerated an exodus of whites to the suburbs, and many middle-class blacks followed, shrinking the city’s population from a peak of 1.8 million in the 1950s to half that now.

About 83 percent of the current population is African-American; of cities with more than 100,000 people, only Gary, Ind., had a higher percentage in the latest census.

Detroit’s crime, poverty, unemployment and school dropout rates
are among the worst of any major U.S. city. The bus system is widely panned; car and home insurance rates are high. Chain grocery stores are absent, forcing many Detroiters to rely on high-priced corner stores.

“There’s always been a real can-do spirit among our people,” said the Rev. Edgar Vann, pastor of Second Ebenezer Church. “That’s being beaten down right now. … These times, unlike others, have sapped a lot of that spirit from them.”

Vann, in addition to overseeing a 5,000-member megachurch, founded the Vanguard Community Development Corp., which under Scott Alan Davis’s leadership is building scores of new homes and offering education programs in the blighted North End.

One apartment complex, for the elderly, is rising barely a block from two grade schools recently abandoned by the city, and now sitting empty and ransacked.

“It’s death to the neighborhood,” said Vann, some anger in his voice, as he gestured to homes that had been abandoned and vandalized since the schools closed.

He worries that despair and frustration may take a toll as Detroiters see more manufacturing jobs vanish and get no short-term answer when they ask, “What next?”

“Somebody needs to hear us before we begin to see a rise of social upheaval,” Vann said. “I hate to say that. It’s a God-forbid reality.”

—

For Mark Covington, as for many of his neighbors, there are two Detroits. One features swanky casinos, opulent hotels and two new sports stadiums, beckoning high rollers and deep-pocketed out-of-towners to a relatively vibrant downtown. Luxury condo developments are opening; an ambitious RiverWalk project is mostly completed.

Then there’s the vast Detroit of decaying neighborhoods, with weedy, trash-strewn lots and vacant, burned-out houses. Some areas, even close to downtown, have a rural look because so many lots are now empty.

“It makes me want to leave,” said Covington, 36. “But I figure, if I leave, who else is going to help? Who else is going to do it? People like me are what’s going to turn Detroit around.”

With no job and plenty of time on his hands, Covington has spent the past year working on what he calls the Georgia Street Garden – three empty lots he and his friends have converted into an inner city farm east of downtown.

It’s one of hundreds of urban vegetable gardens citywide that have taken root on land cleared after the razing of abandoned homes.

Covington and his friends did what the city hadn’t done: moved trash from the lots to the curbs. They planted tomatoes, collard greens, kale, cabbage, herbs, broccoli and other vegetables, as well as a few fruit trees.

“During the time I was out here cleaning up, I thought it would be a good idea for a garden,” he said. “Everybody uses this path to go up to the closest grocery store and the closest corner store. I figured if they gotta walk past here. … maybe they’ll pick some food instead of having to go up to the grocery store all of the time.”

A makeshift, wooden movie screen was erected last summer for outdoor film nights.

“I’m seeing camaraderie around here I haven’t seen since I was a little kid,” Covington said. “It’s actually starting to feel like a village again.”

He just wishes they had more help from city leaders.

“I’m proud our downtown is coming back,” Covington said. “They’ve put money into the downtown. We need a downtown. …. Everybody understands that. But what about the people that pay for it? I mean, we pay our taxes. We need city services. It’s the crime and cleaning up.”

“I just don’t understand how they, anybody in the city … the mayor’s administration, can ride through the

neighborhoods and see the way it is and not want to do anything about it.”

For all its woes, Detroit has no shortage of residents offering to tackle them. There are 15 candidates for the Feb. 24 special mayoral election necessitated by the conviction of Kwame Kilpatrick for trying to cover up an affair with a former top aide.

The winner of the special election only serves out Kilpatrick’s unfinished term, and a regular mayoral election will be held in November, burdening the city with a year of political uncertainty and division as it grapples with staggering problems.

“There are some good candidates – I’ve never seen a field as broad and deep,” said Steve Tobocman, who represents a Detroit district in the state legislature. “That being said, I don’t think there’s a concrete vision on how to deal with the real challenges.”

Solely in terms of municipal government, the challenges are daunting. Mayor Ken Cockrel Jr. said Friday the city’s deficit is approaching $300 million, and he ordered all departments to cut their budgets by 10 percent. The Detroit Public School District faces a deficit of more than $400 million, prompting the state to declare a financial emergency. The district’s superintendent, Connie Calloway, was fired on Monday.

Several dozen schools have been closed in the past three years, and civic leaders worry the system will be incapable of helping young Detroiters prepare for whatever new types of jobs might emerge down the road.

“Most of the middle-class parents have disengaged, taken their kids out,” said Vann. “We don’t have the parent advocacy that’s necessary to drive reform.”

The FBI’s latest statistics, for 2007, show Detroit with the highest violent crime rate of any major city. Yet Jeriel Heard, chief of jails and court for Detroit’s Wayne County, said jail conditions may deteriorate because of budget-related pressure to eliminate a quarter of the roughly 800 jail deputy positions.

Heard confirmed that some offenders, notably those without homes of their own, were now expressing reluctance to leave jail when their sentences were done.

He also reported that property crime in some Detroit neighborhoods had stabilized or declined because targets of opportunity were fewer now that most remaining residents are poor and many of the homes have been abandoned and cannibalized.

Trying to combat the blight, the city has applied for $47 million in federal neighborhood stabilization money, with half earmarked to tear down more than 2,300 vacant homes. About $8 million would be spent to rehabilitate vacant houses and $4 million to construct new houses.

But this effort would make only a small dent. About 44,000 of the 67,000 homes that have gone into foreclosure since 2005 remain empty, and it costs about $10,000 to demolish each vacant house, according to Planning and Development Department director Doug Diggs.

Overall, the residential real estate market is catastrophic, with the Detroit Board of Realtors now pegging the average price of a home in the city at $18,513. Some owners can’t find buyers at any price.

“If you no longer can sell your property, how can you move elsewhere?’ said Robin Boyle a professor of urban planning at Wayne State University. “Some people just switch out the lights and leave – property values have gone so low, walking away is no longer such a difficult option.”

—

Looking ahead, Detroit civic leaders express long-term optimism but acknowledge the shift away from a heavy-manufacturing economy will be painful.

“Up until the ’70s, you could come to the city without education, without speaking English, and get a job in the auto industry and instantly be in the middle class, economically speaking,” said Mike Stewart, director of Wayne State’s Walter P. Reuther Library

and an expert on the auto industry.

“A lot of folks in the city depended on these jobs for generations – they don’t exist anymore,” he said. “A lot of Detroiters are unprepared, educationally and technologically, to cope.”

Another fundamental problem is the gap between the city’s circumstances and those in the surrounding region, which includes many relatively affluent, predominantly white suburbs.

“The lack of support, the disparities with the rest of the region are greater than folks realize,” said Tobocman, a Democrat who served as House majority floor leader. “I’m not sure the system can sustain itself.”

But he said the conversation on one option – greater regional sharing of local tax revenue – “is not a real active one.”

Mark Douglas, 41, is among the metro area’s most successful African-American car dealers – he succeeded his father in 2005 as president of Avis Ford in Southfield, one of the suburbs bordering Detroit to the north.

“Detroit has got to figure out a way to make people feel it’s safe – if people don’t want to live there, it’s tough to develop any kind of tax base,” Douglas said. “Whites have to move back in. You’ve got to have the integration factor. Everyone has to come together.”

Though Avis Ford is faring better than some local competitors, the recession has taken a toll. It sold only 112 new vehicles in October, down from about 200 in October 2007.

Douglas said the dealership is recouping some of the loss in new car sales by performing service work on older cars no longer covered by warranties.

His father, Walter, 76, remains chairman of Avis Ford and serves as a trustee of many organizations, including the Detroit Symphony.

“This has been the most difficult and challenging time in my recollection,” he said.

For some community leaders, the drumbeat of bad news seems like overkill.

“All of Detroit is not going to hell – we’ve been hit unfairly,” said the Rev. Wendell Anthony, president of Detroit branch of the NAACP. “Our best days are in front of us.”

Short-term, he said two crucially needed steps would be a moratorium on further home foreclosures and pressure on banks to make loans more available.

Another civic leader, William F. Jones Jr., expressed concern that the inevitable auto industry retrenchment might force cutbacks in corporate support of local nonprofits.

“Detroit is a very giving community, but it’s hard to reach out beyond your capacity,” said Jones, who recently retired as chief operating officer of Chrysler Financial and will become head of Focus:HOPE on Jan. 1

“I hope the region is prepared to band together, because we’re all in this together,” he said. “We won’t get through the tough times if we don’t have a dream of what’s ahead.”

Detroit’s downtown abounds with symbols of past dreams – the still-gleaming round towers of the Renaissance Center of the ’70s, Super Bowl XL venue Ford Field, the three hotel-casino resorts with their gaudy exterior lights and cavernous gaming rooms.

Yet less than two miles from downtown stands the decaying, 18-story Michigan Central railroad station, built in 1913 and unoccupied for 20 years while developers shied way from the cost of restoring its Beaux-Arts grandeur. Along Grand River Avenue, a six-lane thoroughfare leading from downtown to the northwest, liquor stores and check-cashing outlets alternate with scores of abandoned commercial buildings, some boarded up, others just gutted shells.

To the west, in the modest residential neighborhood of Brightmoor, there were five burnt-out houses on a single short block. The facade of one was daubed in red and blue graffiti – some obscene, some gang-related; the charred rubble inside included a battered toy truck.

The scene brought to mind the city’s motto, crafted by a Roman Catholic priest after a devastating fire in 1805: “We hope for better things; it will arise from the ashes.”

WASHINGTON — Citing danger to the national economy, the Bush administration came to the rescue of the U.S. auto industry Friday, offering $17.4 billion in emergency loans in exchange for concessions from the deeply troubled carmakers and their workers.

At the same time, Treasury Secretary Henry Paulson said Congress should authorize the use of the second $350 billion from the financial rescue fund that it approved in October to rescue huge financial institutions.

President Bush said, “Allowing the auto companies to collapse is not a responsible course of action.” Bankruptcy, he said, would deal “an unacceptably painful blow to hardworking Americans” across the economy.

One official said $13.4 billion of the money would be available this month and next, $9.4 billion for General Motors Corp. and $4 billion for Chrysler LLC. Both companies have said they soon might be unable to pay their bills without federal help. Ford Motor Co. has said it does not need immediate help.

Bush said the rescue package demanded concessions similar to those outlined in a bailout plan that was approved by the House but rejected by the Senate a week ago. It would give the automakers three months to come up with restructuring plans to become viable companies.

If they fail to produce a plan by March 31, the automakers will be required to repay the loans, which they would find very difficult.

“The time to make hard decisions to become viable is now, or the only option will be bankruptcy,” Bush said. “The automakers and unions must understand what is at stake and make hard decisions necessary to reform.”

Bush’s plan is designed to keep the auto industry running in the short term, passing the longer-range problem on to the incoming administration of President-elect Barack Obama.

The White House package is the lifeline desperately sought by U.S. automakers, who warned they were running out of money as the economy fell deeper into recession, car loans became scarce and consumers stopped shopping for cars.

The carmakers have announced extended holiday shutdowns. Chrysler is closing all 30 of its North American manufacturing plants for four weeks because of slumping sales; Ford will shut 10 North American assembly plants for an extra week in January, and General Motors will temporarily close 20 factories – many for the entire month of January – to cut vehicle production.

Bush said the auto manufactures have faced serious challenges for many years: burdensome costs, a shrinking share of the market and plunging profits. “In recent months, the global financial crisis has made these challenges even more severe,” he said.

The president said that on the one hand, the government has a responsibility not to undermine the private enterprise system, yet on the other hand, it must safeguard the broader health and stability of the U.S. economy.

“If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers,” he said.

“Under ordinary economic circumstances, I would say this is the price that failed companies must pay,” the president said. “And I would not favor intervening to prevent the automakers from going out of business. But these are not ordinary circumstances.

“In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action.”

Chrysler CEO Bob Nardelli thanked the administration for its help.

In a statement Friday morning, Nardelli said the initial injection of capital will help the company get through its cash crisis and help eventually return to profitability. He said Chrysler was committed to meeting the conditions set by Bush in exchange for the money.

“An abrupt bankruptcy for autos could be devastating for the economy,” Bush told reporters aboard Air Force One during an unannounced trip to Iraq and Afghanistan. “We’re now in the process of working with the stakeholders on a way forward. We’re not quite ready to announce that yet.”

Bush wouldn’t give a precise timetable but said, “This will not be a long process because of the economic fragility of the autos.”

The Bush administration is considering ways of providing emergency aid to General Motors Corp. and Chrysler LLC, which have said they could run out of cash within weeks without help from the government.

White House officials said they did not anticipate announcing funding for the companies on Monday, as auto industry officials held discussions with the administration on the amount of money and any conditions that might be imposed.

“I think it’s very likely the White House will do what it said it’s going to do, not allow the auto industry to collapse,” said Sen. Carl Levin, D-Mich., among several auto state lawmakers optimistic about the funding.

But Sen. Bob Corker, R-Tenn., said he spoke with the White House early Sunday and no decisions had been made. “I don’t think they yet know what they’re going to do,” Corker said. Ron Gettelfinger, the president of the United Auto Workers, said the union had not held discussions with the White House.

General Motors and Chrysler are seeking the funding, while Ford Motor Co. has said it has enough cash to survive 2009.

Last week, Congress failed to approve $14 billion in loans to help the automakers. The plan would have provided short-term financing to the industry and created a “car czar” who would ensure that the money would transform the Detroit automakers into competitive companies.

The administration, following the legislative defeat, said it was considering several options, including using money from the $700 billion financial bailout fund to provide loans to the carmakers. Bush reiterated Monday that tapping the financial bailout fund remains an option.

Providing aid to the companies could represent a change for the White House, which previously insisted that the Wall Street rescue plan should be used solely to help financial institutions.

Corker and other Republicans sought a compromise that would have required the carmakers to restructure their debt and bring wages and benefits in line with those paid by Toyota, Honda and Nissan in the United States. The legislation died when Republicans demanded upfront pay and benefit concessions from the United Auto Workers, which union leaders rejected.

Corker urged the White House to seek similar concessions from the auto companies and their unions in return for the money. “Of course, the benefit they have — they don’t have to negotiate. They can say this money is available but it’s only available under these conditions,” he said in a broadcast interview.

The administration has several options. It could tap the $700 billion financial rescue bailout fund to provide loans directly to the carmakers or use part of that fund as collateral for emergency loans the automakers could get from the Federal Reserve.

It also could do nothing, leaving open the possibility that one or more of the automakers could go bankrupt. The White House has warned a collapse of the auto industry would severely hurt the economy.

The White House is keeping President-elect Barack Obama and his advisers informed of the discussions. If administration officials choose not to provide the money now, the Obama team could wait for the new Congress, which will have stronger Democratic majorities. But the delay could risk bankruptcy filings by GM and Chrysler.

Gov. Jennifer Granholm, D-Mich., said other countries were providing aid to their automakers and the loans were essential to make the U.S. less dependent on foreign oil.

If the companies don’t get help, “we’ll be replacing our reliance on foreign oil with a reliance on foreign batteries because it’s going to be the battery that’s driving the electric vehicle in the future,” Granholm said.

Corker was on CBS’ “Face the Nation” and “Fox News Sunday.” Levin was on “Face the Nation.” Gettelfinger was on CNN’s “Late Edition” and Granholm was on NBC’s “Meet the Press.”

General Motors Corp. and Chrysler LLC, which have said they could run out of cash within weeks, have few options left after the dramatic defeat in the Senate of a $14 billion bailout for the domestic auto industry.

Its demise late Thursday prompted immediate calls from lawmakers in both parties for the Bush administration to tap into the $700 billion Wall Street bailout to rescue the beleaguered auto industry. The bill failed after talks broke down over the refusal of the United Auto Workers union to meet Republican demands for aggressive wage reductions.

The Senate rejected the bailout 52-35 on a procedural vote — well short of the 60 required — after the talks fell apart.

“I dread looking at Wall Street,” said Senate Majority Leader Harry Reid in anticipation of Friday’s stock market reaction. “It’s not going to be a pleasant sight.”

Stock markets in Asia and Europe dropped sharply on Friday after getting word of the bailout’s failure.

The Bush administration has repeatedly said the Wall Street bailout fund should not be used for emergency aid to the automakers because it was designed to restore stability to the financial sector. Following the vote, the White House said it was studying its options.

“Plan B is the president,” said Sen. Carl Levin, D-Mich. House Speaker Nancy Pelosi said action by President George W. Bush was the “only viable option.”

General Motors and Chrysler are in the most immediate danger while Ford Motor Co. has said it does not need federal help now, but could face collateral damage if one of its domestic rivals fell. With the economy in recession, the auto industry has struggled under the weight of lackluster sales and choked credit markets.

Detroit’s carmakers employ nearly a quarter-million workers, and more than 730,000 others produce materials and parts for cars. If one of the automakers declared bankruptcy, some estimate as many as 3 million U.S. jobs could be lost next year.

The White House said it was disappointed by the vote and the legislation “presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds only go to firms whose stakeholders were prepared to make difficult decisions to become viable.”

Many congressional Republicans and some economists said the companies would be best to pursue a prearranged bankruptcy that would allow them to restructure quickly. But most Democrats and the carmakers rejected that, arguing it would quickly lead to liquidation because consumers would never buy cars from a bankrupt auto company.

As it lobbied unsuccessfully on Thursday, White House officials said the weak economy couldn’t afford the collapse of the auto industry. President-elect Barack Obama said an industry shutdown would have a “devastating ripple effect” on the already battered economy.

GM said in a statement is was “deeply disappointed” that the bipartisan agreement faltered. “We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis,” the company said.

Chrysler said it was also disappointed and would “continue to pursue a workable solution to help ensure the future viability of the company.”

The companies efforts for funding failed after a marathon set of negotiations at the Capitol among labor, the auto industry and lawmakers who bargained into the night to salvage the auto bailout at a time of soaring job losses and widespread economic turmoil.

The group came close to agreement, but it stalled over the UAW’s refusal to agree to wage cuts before their current contract expires in 2011. Republicans, in turn, balked at giving the automakers federal aid.

The UAW did not immediately react to the failure of the Senate proposal.

Aid to the automakers gained urgency last week when the government reported the economy had lost more than a half-million jobs in November, the most in any month for more than 30 years.

The stunning disintegration of the auto bailout proposal was eerily reminiscent of the defeat of the $700 billion Wall Street bailout in the House, which sent the Dow tumbling and lawmakers back to the drawing board to draft a new agreement to rescue financial institutions and halt a broader economic meltdown. That measure ultimately passed and was signed by Bush.

It wasn’t immediately clear, however, how the auto aid measure might be resurrected in a bailout-fatigued, postelection Congress, with Bush’s influence at a low ebb.

Earlier in the week, the House approved a bill that would have created a Bush-appointed overseer to dole out the money. At the same time, carmakers would be compelled to return the aid if the “car czar” decided the carmakers hadn’t done enough to restructure by spring.

Some Senate Democrats joined Republicans in turning against the House-passed bill, despite increasingly urgent expressions of support from the White House and Obama for quick action to spare the economy the added pain of a potential automaker collapse.

Republicans are challenging lame-duck President George W. Bush on the proposal, arguing that any support for the domestic auto industry should carry significant concessions from autoworkers and creditors and reject tougher environmental rules imposed by House Democrats.

The House approved the plan late Wednesday on a vote of 237-170. It would infuse money within days into cash-starved General Motors Corp. and Chrysler LLC. Ford Motor Co., which has said it has enough cash to make it through 2009, would also be eligible for federal aid.

Supporters cited dire warnings from GM and Chrysler executives, who have said they could run out of cash within weeks, and concerns that a carmaker collapse would erase tens of thousands of jobs and jolt an already bleak economy.

Democrats and the Bush White House hoped the Senate would vote on the legislation as early as Thursday. But based on concerns raised by GOP senators — and a still-uncertain level of support even among Democrats — they had a lot of work to do.

A leading Senate Republican opponent said Thursday that he cannot back spending $14 billion of taxpayer money on a plan that would call for a restructuring of the industry, but which fails to detail just how that would be accomplished.

“I think that is putting the cart before the horse and isn’t reponsible in terms of tax dollars,” Sen. David Vitter of Louisiana said on CBS’s “The Early Show.”

The measure’s murky outlook reflected the difficulty of approving another federal financial rescue on the heels of the deeply unpopular, $700 billion Wall Street bailout, as the clock ticks down on the current Congress and Bush’s influence is at a low ebb.

“People realize that this bill is an incredibly weak bill (and) is the product of an administration that wants to kick the can down the road and let somebody else deal with it,” said Sen. Bob Corker, R-Tenn.

Even Republicans representing states with automobile plants said the proposal was far from ideal. Sen. Kit Bond, R-Mo., whose state is home to five auto plants, said he wanted to see changes. Sen. George Voinovich, R-Ohio, said the bill lacked the necessary Republicans to pass the Senate.

The measure would create a government “car czar,” to be named by Bush to issue the loans, empowered with the ability to yank back the loans and force the carmakers into bankruptcy next spring if they fail to cut quick deals with labor unions, creditors and others to restructure their businesses and become viable.

Opposition wasn’t limited to Republicans.

Democratic Sen. Max Baucus of Montana is opposing the measure because of a provision to bail out transit agencies that were involved in transactions now considered unlawful tax shelters.

Under the House-passed bill, the carmakers would have to submit blueprints on March 31 to the industry overseer showing how they would restructure to ensure their survival, although they could be given until the end of May to negotiate with the government on a final agreement.

The automakers initially asked Congress for $25 billion, then returned two weeks later to plead for as much as $34 billion. But with the White House refusing to dole out new spending for the Big Three, congressional Democrats agreed to use an existing program that was to help carmakers retool their factories to make more fuel-efficient cars.

That fund yielded only $15 billion in emergency loans, and when negotiators agreed to leave some money in the environmental program, the amount fell to $14 billion.

Democrats agreed to scrap language — which the White House had declared a deal-breaker — that would have forced the carmakers to drop lawsuits challenging tough emissions limits in California and other states. But they kept a provision to force the automakers to abide by those states’ limits — a kind of consolation prize for environmentalists, who already were livid at the raid of the fuel-efficiency program.

Senate Democrats unveiled a nearly identical measure that omitted the requirement, but that bill still faced long odds.

The Bush administration is expected to work with President-elect Barack Obama‘s team on choosing the industry czar. The overseer would have say-so over any major business decisions by the automakers while they were taking advantage of federal aid, with veto power over any transaction of $100 million or more.

The measure also would attach an array of conditions to the bailout money, including some of the same restrictions imposed on banks as part of the $700 billion Wall Street rescue. Among them are limits on executive compensation, a prohibition on paying dividends and requirements that the government share in future profits and taxpayers be repaid before any other shareholders.

Also included in the bill is an unrelated pay raise for federal judges.

Officials struck an agreement in principle on the measure Tuesday and hoped to finalize it and schedule swift House and Senate votes as early as Wednesday. Money could be disbursed within days to cash-starved General Motors Corp. and Chrysler LLC, while Ford Motor Co. — which has said it has enough liquidity to stay afloat — would be eligible for federal aid.

All three would have to negotiate with labor unions, creditors and others and submit blueprints by March 31 to an industry czar named by President George W. Bush showing how they would restructure to ensure their survival. If not, the emergency loans would be revoked, the companies cut off from further federal help, and the government overseer could order his own overhaul, including forcing them into bankruptcy.

After days of marathon negotiations over the plan, congressional aides and White House officials were still fine-tuning legislative details of the agreement. It could face substantial obstacles from Republican lawmakers, who remained skeptical of the White House-negotiated plan.

A group of conservatives led by Sen. John Ensign, R-Nev., who has threatened to block the measure, planned a midday news conference Wednesday.

As the measure took shape Tuesday, Sen. Mitch McConnell, R-Ky., said he was concerned that Democrats were proposing a package that “fails to require the kind of serious reform that will ensure long-term viability for struggling automobile companies.”

With their approach, “we open the door to unlimited federal subsidies in the future,” McConnell said.

Sen. Bob Corker, a Tennessee Republican, said Wednesday that “I don’t know if this is going to pass.”

He said on CBS’s “The Early Show” he believes the Bush administration “snatched defeat from the jaws of victory” by consenting to the outline of legislation that fails to give taxpayers sufficient assurances that the money would be well-spent.

Corker also said he believes bankruptcy might ultimately be the right path, saying that might be “the only way” for the industry to proceed.

Getting 60 votes for an agreement, with many senators expected to be absent for the emergency, postelection debate, could be tricky.

Sen. Carl Levin, D-Mich., an ally of the auto industry, said, “This gets us to the 20-yard line, but getting over the goal line will take a major effort, particularly in the Senate.”

He called for Bush and President-elect Barack Obama to lobby personally for the auto bailout.

A breakthrough on the measure came when negotiators reached a compromise to require the czar to revoke the loans and deny any further federal aid to automakers that don’t strike restructuring deals by next spring. Democrats had proposed giving the overseer that option but not requiring it.

“A great deal of progress has been made on auto legislation that will protect the taxpayer and ensure that short-term financing is available only to companies prepared to undertake the dramatic restructuring necessary to become viable and competitive,” Dana Perino, the White House press secretary, said late Tuesday.

One potential stumbling block remained. Democrats’ were still refusing to scrap language, vehemently opposed by the White House, that would force the carmakers to drop lawsuits challenging tough emissions limits in California and other states.

That measure “kills the deal,” said Dan Meyer, Bush’s top lobbyist.

Senior Democratic aides acknowledged as much Tuesday and said they expected the provision to be dropped.

Environmentalists, who count House Speaker Nancy Pelosi, D-Calif., among their closest allies, already were irate that the bailout uses money set aside for a program to help the automakers finance the retooling of their factories so they could produce greener vehicles.

Another remaining hang-up was over ensuring that Cerberus, the private equity firm that owns Chrysler LLC, would reimburse the government if the auto company defaulted on its loan, said a congressional negotiator who spoke only on condition of anonymity because he was not authorized to disclose details of the emerging deal.

The measure would attach an array of conditions to the bailout money, including some of the same restrictions imposed on banks as part of the $700 billion Wall Street rescue. Among them are limits on executive compensation, a prohibition on paying dividends and requirements that the government share in future profits and taxpayers be repaid before any other shareholders.

Also included in the plan is a requirement that the carmakers taking federal aid get rid of their corporate jets — which became a potent symbol when the Big Three CEOs used them for their initial trips to Washington to plead before Congress for government assistance.

The Bush administration would allow a “car czar” envisioned in the legislation to force the companies into bankruptcy if they weren’t doing enough to cut labor costs, restructure their debt and downsize to stay afloat.

At the same time, the head of the United Auto Workers, Ron Gettelfinger, signaled that his union might demand an equity stake in General Motors Corp., if asked to give up more.

The fast-paced developments come amid an environment of general economic instability, the Congress and the presidency both in transition, a ricocheting Wall Street and the Federal Reserve Board, Treasury and other agencies fighting to steady the reeling financial industry.

House Speaker Nancy Pelosi said she supports the concept of a federal overseer of any rescue plan, saying she lacked confidence the heads of the car companies could solve the problem if “left to their own devices.”

Pelosi appeared on morning television Tuesday after a night of intense Capitol Hill discussions aimed at narrowing the differences over a $15 billion bill that would, among other things, rush short-term loans to the industry. The plan would require that the Big Three reinvent itself to survive — and that it pay back the government if it doesn’t. The package could come to a vote as early as Wednesday.

Pelosi said she thought taxpayers should consider it “a second chance” rather than a bailout.

Deputy White House press secretary Tony Fratto said Tuesday, “We made progress and hope to continue making progress. We want to move quickly, but it’s important that we get the policy right.”

Cash from any such rescue plan would immediately be plowed into General Motors Corp. and Chrsyler LLC. Ford Motor Co. has said that it does not have an emergency cash-flow problem and that it would not ask for short-term assistance.

In testimony before Congress last week, General Motors and Chrysler, which have said they are weeks from collapse, made it clear they would need a total of $14 billion to $15 billion to survive through early 2009.

“We do not face a near-term liquidity issue, and we will not be seeking a short term bridge loan,” the company said in a statement Monday night. “But Ford fully supports an effort to address the near-term liquidity issues of GM and Chrysler, as our industry is highly interdependent and a failure of one of our competitors could affect us.”

Robert Lutz, GM’s vice president of global product development, also said he could accept a federally appointed czar to supervise implementation of a restructuring plan.

“Well, whether we need it or not, I think it’s reasonable that when the federal government steps in with taxpayer money, they’re not going to–they’re not going to lend us the money and just say, `Do the best you can with it and tell us when you need more.’ Obviously, there’s going to be some kind of oversight and I think that’s a reasonable thing to expect,” he said on CBS’s “The Early Show.”

The measure being discussed in Congress would put a government overseer named by Bush in charge of setting guidelines for an industrywide overhaul, with the power to revoke the loans if the automakers fail to do what’s necessary to become viable. The White House was seeking tougher consequences, including allowing the overseer — being called a car czar — to force the companies into bankruptcy if they weren’t doing enough to cut labor costs, restructure their debt and downsize to stay afloat.

Pelosi said she had no candidates for the job, but said that Paul Volcker, a former Federal Reserve chairman and now an economic adviser to President-elect Barack Obama, would be a good choice. She said he enjoys the public’s confidence.

Despite optimism on both sides that Congress and the White House could reach a swift agreement on the rescue package, it was still a tough sell on Capitol Hill. With lawmakers in both parties bitter over the administration’s use of the $700 billion Wall Street bailout, many of them were preparing to hold their noses and vote for yet another federal rescue to avert deeper economic disaster.

“While we take no satisfaction in loaning taxpayer money to these companies, we know it must be done,” Senate Majority Leader Harry Reid, D-Nev., said. “This is no blank check or blind hope.”

Gettelfinger, who appeared Tuesday on CBS, declined to say whether his union would demand a seat on GM’s board of directors in exchange for contract concessions. But he did say that “if we’re gonna be asked to give up more, and it appears that we are, then we should have an equity stake in the company.”

The developing plan would dole out auto industry loans right away, drawing the money from an existing program meant to help the carmakers retool their factories to produce more fuel-efficient vehicles. Then the czar would write guidelines, due on the first of the year, for restructuring the companies.

The proposal would attach an array of conditions to the auto bailout money, including some of the same restrictions imposed on banks as part of the Wall Street rescue. Among them are limits on executive compensation, a prohibition on paying dividends, and requirements that the government share in future profits and taxpayers be repaid before any other shareholders.

The proposal gives the car czar say-so over any major business decisions by the automakers while they’re taking advantage of federal aid. The companies would have to open their books to the government, including informing the overseer of any transaction of $25 million or more.

Also under discussion is a requirement that the carmakers taking federal aid get rid of their corporate jets — which became a potent symbol of the industry’s ineptitude when the Big Three CEOs used them for their initial trips to Washington to plead before Congress for government assistance.

Still, the White House wanted clearer consequences for the automakers if a company was not meeting its own promises for long-term viability, according to officials who would comment on the continuing negotiations only on condition of anonymity.

Under Democrat’s proposal, if the Big Three didn’t come up with suitable restructuring plans by the end of March, the czar would have to submit his own blueprint to Congress for a government-mandated overhaul.

Sen. Carl Levin, D-Mich., a key ally of the auto industry, said getting the roughly 15 Republicans needed to support the plan was an uphill battle.

“This is a real hill to climb even if we can get agreement between the White House and congressional leaders,” he said.

The plan would draw the emergency aid from an existing loan program meant to help the automakers build fuel-efficient vehicles. The size of the package hasn’t been finalized, but it is expected to be about $15 billion, several congressional aides said.

It would create a board composed of Cabinet secretaries from the departments of Treasury, Energy, Labor, Commerce and Transportation plus the Environmental Protection Agency administrator to oversee a broad auto industry restructuring. A congressional aide outlined the emerging measure on condition of anonymity because it is not yet completed.

In return for the money, the carmakers would have to agree to terms similar to those placed on banks that receive funds under the $700 billion Wall Street bailout: to limit their top executives’ pay packages, cease paying dividends, give the government a chunk of future gains and guarantee that taxpayers would be reimbursed before any other shareholders, the aide said.

The bill under discussion would place the special investigator overseeing the bank rescue in charge of keeping tabs on the auto bailout.

The White House and Democratic congressional leaders are narrowing their differences over the auto bailout, but had yet to agree on specific legislative details, officials said.

Sen. Chris Dodd, D-Conn., chairman of the Banking Committee, said Sunday that General Motors Corp.‘s chief executive, Rick Wagoner, “has to move on” as part of a government-run restructuring.

“I think you have got to consider new leadership,” Dodd said on CBS’ “Face the Nation.”

On Monday, Dodd said that “it’s not my job to hire and fire, but what I suggest is, you need to have new teams in place here … if you’re going to convince the American public” that the financial relief plan is necessary and justified.

Dodd also said on ABC’s “Good Morning America” Monday that figures showing over a half-million people lost their jobs in November amounts to a “game-changer” in the debate over an aid package.

UAW President Ron Gettelfinger, appearing on NBC’s “Today” show, said his union is ready to go back to the bargaining table to help the auto companies, but he also said that workers should not be made “scapegoats” for their problems.

Criticized for staying on the sidelines until now, President-elect Barack Obama voiced support Sunday for the bailout legislation being drafted in Congress. He accused car industry executives of a persistent “head-in-the sand approach” to long-festering problems.

In an appearance on NBC’s “Meet the Press,” Obama said Congress was doing “the exact right thing” in drafting legislation that “holds the auto industry’s feet to the fire” at the same time it tries to prevent its demise.

GM spokesman Steve Harris said the company appreciates Dodd’s support for the loans, but added, “GM employees, dealers, suppliers and the GM board of directors feel strongly that Rick is the right guy to lead GM through this incredibly difficult and challenging time.”

Rep. Barney Frank, a Massachusetts Democrat, warned that doing nothing would be a disaster in the middle of what he called the worst economic crisis in 70 years.

Frank spoke during the second day of testimony from Detroit’s Big Three automakers for a government bailout of up to $34 billion — and shortly after the government reported the biggest monthly job loss in 34 years.

Congress is considering a range of options, including a government-run oversight board. But no plan seems to be gaining much traction.

“We made mistakes, which we’re learning from,” General Motors chief executive Rick Wagoner told the Senate Banking Committee.

Ford CEO Alan Mulally also acknowledged big mistakes, saying his company’s mantra once was “You build it, they will come.”

“We produced more vehicles than our customers wanted, then slashed prices,” he said. But as a result of these past mistakes, “we are really focused,” he said.

The Big Three executives made the trip from Detroit in new-model hybrid autos made by their respective companies, two weeks after a botched appeal for $25 billion in which they were chided for flying on private jets to beg for money.

Chrysler CEO Bob Nardelli promised that his company, recipient of a previous government-subsidized rescue loan in the 1970s that it repaid, would repay taxpayers by 2012 and would devote itself to manufacturing “fuel-efficient cars and trucks that people want to buy.”

Sen. Richard Shelby of Alabama, the senior Republican on the panel, complained that the pricetag on the package had jumped since the trio last appeared just two weeks ago

He pressed the automakers to explain why, and to justify how such aid would not simply “prop up a failed business model for a few months … and how are you going to pay it back to the taxpayers?”

Banking Committee Chairman Chris Dodd, D-Conn., who supports helping the industry, said detailed plans submitted earlier this week by the three auto companies on how they would use low-cost federal loans to reorganize still left a lot of questions unanswered.

Still, Dodd said, the economic news has become even more bleak since the auto executives appeared before Congress in late November.

“In just two weeks time, the clouds on the economic horizon have grown even darker and greater in number,” Dodd said, noting that the U.S. economy has now been declared official in a recession that began a full year ago.

Dodd said doing nothing and allowing one or all three of the companies fail, as some lawmakers have advocated, “plays Russian roulette with the entire economy of the United States.”

Several lawmakers in both parties, including Dodd, have pressed the automakers in recent days to consider a so-called “pre-packaged” bankruptcy in which they would negotiate with creditors in advance and downsize, then file for Chapter 11 protection in hopes of emerging quickly as stronger companies. The Big Three have publicly shunned the notion, but executives have indicated in recent days that it might ultimately be necessary.

GM’s survival plan envisions an administration-led restructuring overseen by a government oversight board.

“If more extensive restructuring is required, GM will work with the oversight board to determine the additional necessary actions,” GM’s written plan said.

United Auto Workers union president Ron Gettelfinger told the committee, “We are prepared to do our part.” But he also said workers for the auto companies shouldn’t have to make disproportionate sacrifices.

He also said that any kind of bankruptcy, even a pre-packaged one, was not “a viable option.” Gettelfinger claimed consuers would not buy autos from bankrupt companies, no matter the terms of the bankruptcy.

Congressional Democrats have urged the administration to tap into an already enacted $700 billion financial bailout program to help the auto industry.

The administration has said that it has no intention of doing so, and would prefer aid be taken from an earlier $25 billion program to help the industry retool its plants to make their vehicles more fuel-efficient.

Treasury Secretary Henry Paulson has said that the $700 billion program is intended only to be used for the financial industry.

Gene L. Dodaro, the top official at Congress’ watchdog agency — the Government Accountability Office — agreed with Dodd that the $700 billion package set up in October “is worded broadly enough” to permit it to be tapped for the automakers.

Dodaro testified that the Federal Reserve also has the authority under existing law to make loans to the domestic auto industry if it so chooses.

Dodd said that both Paulson and Fed Chairman Ben Bernanke had been invited to testify at Thursday’s hearing, but had declined.

Earlier, Senate Majority Leader Harry Reid, D-Nev., said prospects for Congress to act this year seemed slim.

“I just don’t think we have the votes to do that now,” he told The Associated Press.

Critics say the companies have been poorly managed and failed to show they won’t be back for another government rescue.

In the streets outside the Capitol, all three companies were showcasing their futuristic, environmentally friendly models in hopes of counteracting their image as purveyors of gas-guzzling SUVs.

The three executives made the 520-mile trip from Detroit in hybrid cars — a nod to stinging criticism from lawmakers for making their last trip in corporate jets.

Congressional leaders have said Thursday’s Senate hearing — and a companion one on Friday before a counterpart House panel — would help determine whether Congress will take up an auto rescue package in a special lame-duck session next week.

The Big Three are struggling to stay afloat during the longest economic downturn in at least a quarter century, a steep decline in sales and a tight credit market. The three burned through nearly $18 billion in cash reserves during the last quarter.

Chrysler said it needed $7 billion by year’s end to keep operating. GM asked for an immediate $4 billion as the first installment of a $12 billion loan, plus a $6 billion line of credit to use if economic conditions deteriorate. Ford requested a $9 billion “standby line of credit” in case one of its Detroit competitors fails.

The bailout remains unpopular with the public. Sixty-one percent oppose providing the auto companies with billions in federal assistance, according to a CNN-Opinion Research Corp. poll released on Wednesday. Fifty-three percent said it would not help the country’s economy.

Of course, that wouldn’t be such a peril to us if those groups were a) willing to be held responsible for the lives of those individual participants who invest so much and b) accepted their failures as a personal fault as much as our failures. The established idea of credit (extended from the idea of slavery) is that your work will somehow credit you for future purchases and worth. Should your work fall short of the goods you’ve bought and acquired, you assume debt. If you cannot pay back that debt, you file for bankruptcy and start over, your name and credit damaged for some time. Somewhere between the history of using paper currency instead of traded goods to using promised paper currency, Americans accepted the ordeal of permanent debt to those larger institutions. Can’t pay for college? Take out loans. Can’t afford a home? Take out loans, and leverage your salary against them. Need to send your kids to school with a new car? Refinance that first loan you took out and increase debt with little thought to repayment. After all, what’s debt when you die?

This confused process of imaginary money has led us to the demolishing trend of today: personal and corporate responsibility have dissipated. But even more offensive, the government’s knee-jerk reaction has been to safeguard the ones at the top, save their failures topple our lives in total.

Never has the argument for reparations loomed so prominently.

The previously prevalent notion of leaving the mistakes of the past to bear out on your credit line has been tossed to the wayside for a more communal approach; specifically, rescuing every Bob and Barry CEO in the nation with a gentle billion-dollar nudge into continued prosperity. In fact, the rescue language has become so brisk in the mouths of the Pelosis, Reids, Bushes and Obamas that it seems we’d collectively panic if not for the concerted efforts of the Treasury and Federal Reserve to give our industries life. When the mortgage lenders went under, we feared we would lose any homes not fully paid for. As the banks crumbled, businesses and universities worried about the ability to secure loans for another quarter. The pervasive language of anxiety over our declining capitalism made it reasonable to say that government funds should (gasp) help the citizens of our nation…albeit the richest one percent of our citizens, but we had to start somewhere.

Naturally, we should look to the labor force that built the garrisons of industry during the Transatlantic slave trade. Enslaved Africans have been mired in our economic future since the merchant class of New England used their hands and tears to make colonial farms and banks profitable. The tobacco industry gave way to the cotton and textile industry gave way to the sharecropping industry, all of which yielded millions for corporations still existing today. Since that debt has never been repaid, neither in cash nor in resources, the government has its biggest mortgage crisis yet in addressing that history. As automakers fly in private jets with hands outstretched to cushion their already luxurious lives of spendthrift, where are the billions set aside for the descendants of slaves to recoup on their education debt? Where are the billion-dollar bailouts for the men and women who were denied opportunity until recently for their access into higher industry and government? The Native Americans slaughtered by disease and deprivation have only detached casino revenues (which never reach their depressed population), and Black Americans have some stake in sports and entertainment (until we even, says Jay-Z).

As much as Obama’s electoral victory presented us with a new model of racial politics — or the beginnings of new racial politics — we have yet to see the same sympathy for our cheated countrymen of color that’s been extended to reckless executives and tiresome financiers. Supposedly, we should feel proud that the CEOs of GM, Chrysler and Ford have (grudgingly) given up their exorbitant salaries for $1-a-year nominal fees. In fact, I would feel more heartened by that tipping of the scales if descendants of Asian-American railroad workers got their cash retributions for their opening of the Western frontiers. Or, I would feel encouraged if the Mexican workers responsible for every part of our bottom-rung jobs were fairly rewarded with health benefits. As we make steps to provide safety nets for those elites who have toddled with their great-grandparents’ inheritance dollars, we should also consider those of us who never had the advantages (and never expected any), but have braved past those obstacles to create new wealth. Since reparations is an accursed term, I’m comfortable with just labeling it a “bailout” for now.

Unless one of Detroit‘s other Big Three auto companies goes bust, Ford expects to have enough money to make it through next year without government help, it said in a plan that projected the firm will break even or turn a pretax profit in 2011.

Detroit’s automakers, making a second bid for $25 billion in funding, are presenting Congress with plans Tuesday to restructure their ailing companies and provide assurances that the funding will help them survive and thrive.

General Motors Corp., Ford and Chrysler LLC said they would refinance their companies’ debt, cut executive pay, seek concessions from workers and find other ways of reviving their staggering companies.

The Big Three executives also are offering a series of mostly symbolic moves to burnish their images, badly tattered after they arrived in Washington D.C. last month on three separate private jets to plead for a federal lifeline for their struggling companies. All three companies offered separate plans for hearings that will be held Thursday and Friday.

That approach the auto executives took last month led Democratic congressional leaders to declare they didn’t come prepared to justify their pleas and they told them to go back home and ready a new plan.

This week, the automakers are going out of their way to show deference to lawmakers and a willingness to flog themselves for past mistakes. “I think we learned a lot from that experience,” Ford CEO Alan Mulally told The Associated Press in an interview.

Mulally said he’d work for $1 per year if his firm had to take any government loan money. The company’s plan also says it will cancel all management employees’ 2009 bonuses, scrap merit increases for its North American salaried employees next year, and sell its five corporate aircraft.

And for this week’s appearances here, all three company chiefs will skip the lavish travel arrangements. Mulally is coming by car from Detroit for this week’s second round of congressional hearings on government help for the Big Three. GM Chief Rick Wagoner will drive a Chevrolet Malibu hybrid sedan for the 520-mile trek from Detroit to Capitol Hill, spokesman Tony Cervone said Tuesday. And Chrysler LLC CEO Robert Nardelli won’t travel by corporate jet, but a spokeswoman declined to elaborate on his travel plans, citing security reasons.

The unions were preparing to make sacrifices as well. United Auto Workers leaders summoned local union leaders from across the country to an emergency meeting Wednesday in Detroit to discuss concessions the union could make to help auto companies get government loans.

U.S. automakers are struggling to stay afloat heading into 2009 under the weight of an economic meltdown, the worst auto sales in decades and a tight credit market. General Motors, Ford and Chrysler went through nearly $18 billion in cash reserves during the last quarter, and GM and Chrysler have said they could collapse in weeks.

Meanwhile, the auto companies released new sales numbers that underlined the punishing business environment facing the Big Three. Ford said its November U.S. light vehicle sales tumbled 31 percent amid a continued slump in consumer spending and tight credit markets. Sales at Toyota, Japan’s No. 1 automaker, fell 34 percent despite its extension of zero-percent financing on a dozen vehicles.

Ford’s blueprint said it would invest $14 billion over the next seven years to boost its vehicles’ fuel-efficiency, and improve the overall efficiency of its fleet by an average of 14 percent next year. And Ford is calling for a new partnership among automakers, parts suppliers and the government to develop new battery technologies domestically, so the U.S. doesn’t have to rely on foreign batteries — as it now does on foreign oil — to power its cars.

GM will outline efforts to negotiate swapping some of the company’s debt for equity stakes in the automaker, either shares or warrants for them, said two people briefed on the company’s plan.

With eight separate brands, GM will also discuss efforts to shed brands but it would prefer to sell them instead of shutting down Pontiac, Saturn or Saab, said one of the people briefed on the plan. Killing off brands, like GM did with Oldsmobile in 2004, would require cash the company doesn’t have, the person said. The people briefed on GM’s preparations didn’t want to be identified because the plan hadn’t been completed.

Chrysler is expected to outline changes that would include a swap of debt in the company for equity stakes and reductions in some vehicle models, according to a person who was briefed on the plan. The person spoke on condition of anonymity because the discussions were private.

GM, according to its quarterly report filed with the Securities and Exchange Commission, owes creditors $45 billion and it must pay more than $7.5 billion early in 2010 to a UAW-administered trust fund that will take over retiree health care payments.

Ford owes more than $26 billion, with $6.3 billion due to its UAW trust fund at the end of 2009. Chrysler, a private company, does not have to open its books, but its CEO, Nardelli, has said it would be difficult for the company to make it without federal aid. All three likely are negotiating with the UAW for delays in payments to the trusts.

The companies are resisting calls for bankruptcy, arguing that no one would buy a car from an automaker that may not survive the life of the vehicle.

From Roger Simon at Politico:

I do not understand why some people are opposed to a $25 billion government bailout of the U.S. auto industry.

The price is cheap. That $25 billion represents less than three months of the cost of the Iraq war.

To put it another way: If Barack Obama would end the Iraq war just three months early, he could pay for the entire U.S. auto industry bailout, and have about $5 billion left over to spend on luxury items like U.S. education, health care and the environment.

But nobody is putting it that way.

Click here for the full story.

“It’s 3 a.m. and Detroit is calling, not because there is a security emergency, but because there is an economic emergency. It is imperative that Washington picks up the phone.”

“And President-elect Barack Obama must remain steadfast in his quest to aid the auto industry and not be carried away by the noise that is being made about an assistance that would save millions of families from going hungry and losing homes in the Midwest.

“No call can be higher for a new president than one that is predicated on helping families whose hopes for survival have long been tied to the future of the auto industry in Detroit.”

Read the full post here…

Democratic leaders in Congress sidetracked legislation to bail out the auto industry Thursday and demanded the Big Three develop a plan assuring the money would make them economically viable.

“Until they show us the plan, we cannot show them the money,” Speaker Nancy Pelosi, D-Calif., said at a hastily called news conference in the Capitol.

She and Senate Majority Leader Harry Reid, D-Nev., said Congress would return to work in early December to vote on legislation if the General Motors Corp., Ford Motor Co. and Chrysler LLC produce an acceptable plan.

The decision averted a likely defeat of legislation providing $25 billion loans for the industry. Reid and Pelosi both said there was no plan in circulation that could pass both houses of Congress and win President George W. Bush’s approval.

While the decision headed off the defeat of one bill, it did not necessarily translate into passage of a different one.

As a result, the fate of hundreds of thousands of auto workers and even of an iconic American industry hangs in the balance.

The chief executives of the Big Three automakers appealed personally to lawmakers for the loans this week, and warned that their industry might collapse without them. In testimony, they said their problem was that credit was unavailable, and not that they were manufacturing products that consumers had turned their backs on.

But whatever support they found sagged when it became known that each of them had flown into Washington aboard multi-million dollar corporate jets. Reid observed that was “difficult to explain” to taxpayers in his home town of Searchlight, Nev.

The automakers are on a tight timeline. Reid and Pelosi said their plan must be turned over to key lawmakers by Dec. 2 They said hearings were possible the first week of December, and Congress may return to session the following week to consider legislation.

Pelosi stressed that whatever the Big Three provided to Congress, it must show they had a plan for “viability and accountability,” meaning that the were transforming theoir industry in a way that it would become competitive, and that they were clear about how the federal loan money was used.

Even if lawmakers return to vote, they are likely to insist on numerous conditions on any loans. One possibility is to seek a partial ownership of the companies. Another is to limit salaries of top executives. A third is to prohibit use of the funds for any lobbying.

A bipartisan group of auto-state senators reached a last-ditch compromise Thursday to throw Detroit’s Big Three a government lifeline worth billions, but the plan faces an uphill battle in a reluctant Senate.

With the auto bailout stalled, the fate of hundreds of thousands of workers and Detroit’s once-venerable car companies hangs in the balance.

Senate Majority Leader Harry Reid, D-Nev., canceled plans for a vote on a bill to carve $25 billion in new loans out of the $700 billion Wall Street rescue fund. The Bush administration and congressional Republicans oppose that plan.

Warning of economic disaster, Democrats and Republicans from auto industry states reached a deal Thursday on an alternative package that would temporarily divert money from a fuel-efficiency loan program to cover the Big Three’s immediate costs. But it was unclear whether it could draw enough support to pass.

The group, led by Sens. Carl M. Levin, D-Mich. and Kit Bond, R-Mo., scheduled a news conference to announce details.

Even if agreement can be reached to consider their plan, Reid signaled earlier Thursday that the Senate was not likely do so until after Thanksgiving.

“We have some procedural roadblocks,” Reid said.

With all sides sensing doom for a Big Three automaker rescue, the finger-pointing proceeded.

White House press secretary Dana Perino on Thursday blamed Reid for not allowing the Republicans’ separate auto-aid plan to come up for a vote.

“Unfortunately it looks like Sen. Reid just wants to pick up his ball and go home for the next two weeks — two months — for vacation,” she said.

Pressed on what the White House would do if Congress can’t agree on a plan to rescue the automakers this week, Perino said she thought lawmakers would return after the Thanksgiving holiday for an emergency legislative session if an auto company was in imminent danger of collapsing.

“I can’t imagine a scenario where they wouldn’t come back, unless the answer is that they just don’t care. And if that’s the case, then the American people ought to know that.”

Congressional Democrats countered that the Treasury Department already had the power to grant emergency funds to the automakers, but the Bush administration opposed the approach.

Former Massachusetts Gov. Mitt Romney stood steadfastly behind forces opposing the bailout.

Speaking Thursday morning amid growing signs of gridlock in Congress, Romney said, “There’s no question but that if you just write a check, you’re going to see these companies go out of business ultimately.”

Romney, who had run for the Republican presidential nomination, told CBS’ “The Early Show” that he doesn’t want to see the carmakers go out of business, “but we don’t want them to continue business as usual.”

The leaders of General Motors Corp., Ford Motor Co. and Chrysler LLC painted a grim picture of their financial position during two days of congressional hearings, warning that the collapse of the auto industry could lead to the loss of 3 million jobs. Detroit’s automakers, hurt by a sharp drop in sales and a nearly frozen credit market, burned through nearly $18 billion in cash reserves during the last quarter — about $7 billion at GM, almost $8 billion at Ford and $3 billion at Chrysler. Both GM and Chrysler said they could collapse in weeks.

“I don’t believe we have the luxury of a lot of time,” GM CEO Rick Wagoner told a House hearing.

Alan Mulally, the CEO of Ford Motor Co., said the company had enough cash reserves to make it through 2009. But United Auto Workers union president Ron Gettelfinger said a bankruptcy could spawn others.

“If there’s a Chapter 11 (for) one of the companies, it will drag at least one other with them, if not all of them. And I do not believe Chapter 11 is where it will end. It will go to liquidation,” he said ominously.

Automakers ran into more resistance from House lawmakers, who chastised the executives for fighting tougher fuel-efficiency standards in the past and questioned their use of private jets while at the same time seeking government handouts.

“My fear is that you’re going to take this money and continue the same stupid decisions you’ve made for 25 years,” said Rep. Michael Capuano, D-Mass.

The stakes are high. The Detroit automakers employ nearly a quarter-million workers, and more than 730,000 other workers produce materials and parts that go into cars. About 1 million more people work in dealerships nationwide. If just one of the automakers declared bankruptcy, some estimates put U.S. job losses next year as high as 2.5 million.

The White House and congressional Republicans have urged Democrats to support a GOP plan to divert a $25 billion loan program created by Congress in September — designed to help the companies develop more fuel-efficient vehicles — to meet the auto giants’ immediate financial needs.

Sens. Carl Levin, D-Mich., Kit Bond. R-Mo., and George Voinovich, R-Ohio, are trying to broker an alternative that could provide bridge loans or a guarantee that the fuel-efficiency loan fund ultimately would be replenished. Negotiators were discussing a scaled-down aid package of $5 billion to $8 billion to help the automakers survive through year’s end.

But it was unclear if any progress could be made. Democrats strongly oppose letting the car companies tap into the energy loans for short-term cash-flow needs.

Despite the gridlock in Congress, there could be a contingency plan: a return to Washington in December for another postelection session to try to strike a deal.

House Majority Leader Steny Hoyer, D-Md., noted that Democratic leaders were planning to gather for an economic conference the week of Dec. 8. “That is available,” Hoyer said. “The year has not ended.”