Car Bankruptcy Cited as Option by White House

WASHINGTON — The White House raised for the first time on Thursday the prospect of forcing General Motors and Chrysler into a managed bankruptcy as a solution to save the companies from financial collapse. President Bush’s spokeswoman, Dana Perino, confirmed growing speculation within legal circles that the president and Treasury Secretary Henry M. Paulson Jr. were considering the step.“There’s an orderly way to do bankruptcies that provides for more of a soft landing,” Ms. Perino said. “I think that’s what we would be talking about. That would be one of the options.”A senior administration official, however, later described that option as a last resort, to be used only if an agreement for a voluntary overhaul of the industry could not be reached.These officials said the preferred solution would be to force a restructuring of the industry outside of bankruptcy court, extracting concessions that would make the companies more cost-competitive with foreign automakers.In return, the Treasury would tap the financial rescue fund, called the Troubled Asset Relief Program, to make loans to the companies.After a week of talks between the automakers and the Treasury Department over the terms of a possible bailout, Ms. Perino on Thursday said, “we’re very close.”President Bush, speaking at the American Enterprise Institute, an organization dedicated to free market principles, said that he had determined that the economy was too fragile to allow G.M. and Chrysler to fail. The companies have warned that will happen if they do not receive financial aid soon.In his speech Thursday, Mr. Bush made clear that he wanted to avoid a “disorderly bankruptcy” because of “what it would do to the psychology of the markets.” But he also said he was “worried about putting good money after bad,” and suggested he would only approve a plan that allowed the auto companies to “become viable in the future.”Mr. Bush’s comments, a month before he leaves office, made clear that he was worried by the idea of returning to Texas amid more economic chaos and the surge in unemployment that a collapse of the companies could cause.“The autos obviously are very fragile,” he said. He added that he was concerned about what President-elect Barack Obama would face on Jan. 20.