Automakers' $25 Billion Fast-Track Bailout

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Granholm said linking aid to the merger was politically untenable. "Everybody was leery of providing loans to do a deal that would result in a lot of job loss," she said.

According to the governor, there are two likely scenarios to help the auto industry before Obama takes office in January. One: If Democrats can't convince the Bush White House to include the automakers in the $700 billion financial rescue package passed in October by Congress and signed by President Bush, Congress may try to pass an amendment to the bill in the lame duck session this month that specifically includes the automakers.

The other scenario is passage of a broad economic stimulus package favoring infrastructure investment and aid to states. The spending bill, which would be passed during this month's session of Congress, could also include bridge loans to the auto companies.

Obama said Friday that if Congress could not pass such a stimulus bill in the lame-duck session, he would get it passed shortly after taking office. GM executives, though, said the next three months would be critical to that company's cash situation. GM's problem is so severe it has delayed almost of all of its future product plans so it doesn't have to make cash commitments to supplier companies.

A Report on the Big Three's Demise

Granholm and the auto executives who have been lobbying Congress for help have been drawing on a report produced recently by the Center for Automotive Research (CAR) in Ann Arbor, Mich., for ammunition. The report from CAR—which gets some of its funding from the auto companies—projects the impact of all three U.S. auto companies ceasing operations in the U.S. Alternatively, it projects the fallout from a 50% reduction in the industry that might be brought about by the elimination of one or two companies.

The dire findings include the following:

• Should all of the Detroit Three's U.S. operations cease in 2009, the first-year total employment impact would be a loss of nearly 3 million jobs in the U.S. economy—including 239,341 direct job losses at the three auto companies; 973,969 secondary jobs at auto supply companies; and more than 1.7 million jobs at other employers from the reduced spending by those jobless workers. The employment picture would recover somewhat in 2010 and 2011, due to increased U.S. production by foreign-based automakers and dislocated workers finding new jobs.

• Even if just one or more of the auto companies goes down, the first-year losses would still be nearly 2.5 million jobs in the U.S. in the first year before coming back somewhat in the second and third years. That's because the domino effect of one major automaker going under would push several financially fragile auto suppliers into insolvency, which would interrupt production at the remaining car companies.

• In economic terms, a 50% cut in the Detroit Three's U.S. operations would reduce personal income by more than $125.1 billion in the first year, and $275.7 billion over three years.

CAR Chairman David Cole, one of the authors of the study, says legislators and members of the public who doubt the U.S. auto industry is worth saving "should realize the costs of it failing are far greater than the $25 billion in loans the industry is seeking."

Without an injection of cash or a bridge loan from the government, GM's $16.2 billion in cash could shrink by the end of this year to the minimum the company needs to run the business. Analysts say that minimal amount is between $10 billion and $12 billion.