The Bush administration says it will consider using money from the $700billion Wall Street rescue fund to prevent the U.S. auto industry fromcollapsing. After carmaker bailout talks broke down in the Senate,news of possible White House intervention seemed to calm financialmarkets on Friday.
U.S.President George Bush has long opposed dipping into the financialbailout package approved earlier this year to keep Detroit's "BigThree' car companies afloat.
But White House Press Secretary DanaPerino said Friday the administration is considering it. Perino toldreporters aboard the president's plane, "The current weakenedstate of the economy is such that it could not withstand a body blowlike a disorderly bankruptcy in the auto industry."
Later, the Treasury Department said it "will stand ready to prevent an imminent failure until Congress reconvenes."
United Auto Workers president Ron Gettelfinger welcomed the possible change in policy.
"Wedo appreciate the positive statement that was released by the WhiteHouse this morning, where they say that they are reviewing all optionsthat are necessary, including the use of the Troubled Asset ReliefProgram to assist the [auto] industry," he said.
The House ofRepresentatives had approved a plan to spend $14 billion in governmentmoney to keep the auto industry operating. But the Senate Thursdayfailed to agree on the proposal, despite backing from President Bushand President-elect Barack Obama, who says the big automakers cannot beallowed to fail.
"We cannot simply stand by and watch thisindustry collapse," he said. "Doing so would lead to adevastating ripple effect throughout our economy."
Some Senate Republicans said the rescue plan did not do enough to require the automakers to reform the way they do business.
GeneralMotors said Friday it will temporarily close 20 of its factories in theU.S., Canada and Mexico, many of them for the whole month of January. GM says it will build 250,000 fewer vehicles, reducing itsfirst-quarter production by one-third.
Japan's second largestautomaker, Honda, says it will reduce North American production by119,000 vehicles, because of lower demand.
Americans cutspending at retail stores for a record fifth straight month inNovember. The Commerce Department says retail sales were down 1.8percent last month, led by a 2.8 percent drop in auto sales. Becauseof the plummeting sales, U.S. businesses reduced their inventories inOctober by six-tenths of a percent, the largest amount in five years.
Meanwhile,wholesale prices sank in November for the fourth month in a row. TheU.S. Labor Department says the Producer Price Index was down 2.2percent last month, with plummeting gasoline prices leading the way.
EuropeanUnion leaders have backed a $264 billion economic stimulus package tofight off recession in their 27 member nations. French PresidentNicolas Sarkozy says Europe's economy is in "a very serious crisis."
JapanesePrime Minister Taro Aso is announcing a new $255 billion stimuluspackage to boost his country's economy. It includes efforts toincrease employment, encourage lending and inject capital intofinancial markets.
Asian markets slumped Friday, after the U.S.Senate rejected the automakers bailout plan. Japan's Nikkei 225 indexlost 5.6 percent, to 8,236. In Hong Kong, the Hang Seng fell 5.5percent, to 14,758. And China's Shanghai Composite dropped 3.8percent, to 1,954.
European shares closed lower Friday. London's Financial Times 100 lost 2.5 percent, to 4,280. The DAX inFrankfurt was down 2.2 percent, to 4,663. And in Paris, the CAC 40dropped 2.8 percent, to 3,214.