An "Orderly" Auto Bankruptcy

Washington (CBS News)  -- (CBS/ AP) The Bush administration is seriously considering "orderly" bankruptcy as a way of dealing with the desperately ailing U.S. auto industry.

"The president is not going to allow a disorderly collapse of the companies," White House press secretary Dana Perino said Thursday. "A disorderly collapse would be something very chaotic that is a shock to the system."

But, she added, "There's an orderly way to do bankruptcies that provides for more of a soft landing. I think that's what we would be talking about."

President George W. Bush, meanwhile, said he had not yet made up his mind what action to take.

Perino emphasized there were several approaches to assisting the automakers, such as short-term loans out of a $700 billion Wall Street rescue fund. Bush has opposed this approach before, and it is adamantly opposed by many Republicans.

"It's in the spectrum of options and there are a lot of options," Perino said.

Meanwhile, General Motors shot down reports of a possible merger with Chrysler LLC as they insist their focus is on their own turnaround plan, reports CBS News correspondent Jeff Gilbert

"Adding Chrysler's problems to General Motor's own problems adds a level of complexity that would make things a bit riskier for GM and I think they understand that," IHS Global Insight analyst Aaron Bragman told CBS News.

The Wall Street Journal reported Thursday that the two automakers had reopened talks as the industry spirals downward into possible collapse.

Perino said one of the factors delaying an announcement on an auto rescue plan is the continuing discussion between the administration and the various stakeholders who would have to sign on to a managed bankruptcy - entities such as labor unions and equity holders in addition to the companies themselves.

"That is one of the considerations that we're taking into account," Perino said. "In any scenario that comes forward after this decision-making process, all those stakeholders are going to have to make tough decisions."

The presidential spokeswoman would not put a timetable on when an announcement would come, and suggested it may not happen this week. But it is not an option to do nothing, she said.

Adding Chrysler's problems to General Motor's own problems adds a level of complexity that would make things a bit riskier for GM and I think they understand that.

Aaron Bragman
IHS Global Insighth analyst"If you thought that our economy today could handle the collapse of the American auto industry, then you might come to the conclusion that doing nothing was an option," Perino said. "We're going to do something."

Earlier this month, a $14 billion rescue package died in the Senate after passing the House, prompting the White House to pledge action to save the struggling industry.

On Wednesday, Chrysler announced it would close all its North American manufacturing plants for at least a month, the starkest move taken by U.S. automakers as they anxiously await word about government loans.

Chrysler, GM and Ford have been taking dramatic steps as they struggle to survive the recession and U.S. sales have dipped to their slowest rate in 26 years. Chrysler and General Motors fear they might not have enough money to pay their bills in a matter of weeks.

Cerberus Capital Management LP, which owns Chrysler, has made overtures it is considering selling part of its stake in the automaker, in part to show Washington its willingness to restructure, something Congress and the White House have made a priority in order for any rescue package to be passed, people close to the talks told the Journal.

Congress urged Cerberus to infuse Chrysler with capital earlier this month, but the company rejected the plea, noting that Ford and GM were not being asked to inject more capital into their flailing operations, the Journal reported.

Cerberus is eager to accept Congress' proposals, however, in order to combine its financial operations with GM's, a person familiar with the discussions told the newspaper. "That is one of the core goals," the person said.

Attempting to cut costs, GM was halting construction of a plant tied to one of its most important projects, the Volt. Ford also said it will shut down 10 plants for an extra week in January because of sluggish sales.

Chrysler said it would extend the normal two-week holiday shutdown that begins Friday to at least Jan. 19 at all 30 of its factories due to slumping sales.

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