A senior US government official said an auto industry bailout was being put together as quickly and carefully as possible while a new ratings report showed bankruptcy was the most likely way the industry would be restructured.
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“The automakers will get the money as quickly as we can prudently do it,” Paulson said in interview on CNBC television, according to Reuters. “We need to do this, but we need to do it right.
President Bush had earlier told CNN the US was in “a huge recession” and that he did not want to worsen the economy with an automaker collapse.
“On the other hand, I’m mindful of not putting good money after bad,” Bush said. “So we’re working through options.”
His administration has come under renewed pressure from fellow Republicans who want the government to demand tougher concessions from labour and other groups than Democrats and the White House previously agreed were needed to qualify for aid.
The administration has previously hinted it might use part of the US$700bn financial services bailout fund to help the automakers.
According to Reuters, a report by Moody’s Investors Service said on Tuesday that government help paired with ‘pre-packaged’ bankruptcy was the industry’s most likely restructuring scenario.
The report said that without such a bankruptcy – when concessions and financing are arranged before a court filing – the automakers were headed for a “freefall” bankruptcy that would trigger a rise in US unemployment.
Moody’s was reported to have said there was about a 70% chance of a prepackaged bankruptcy coupled with government assistance, and just a 25% chance of a government bailout without a bankruptcy.
