WASHINGTON - THE White House said on Friday that it may tap a 700-billion-dollar (S$1 trillion) rescue package to save US automakers from immediate collapse, a policy reversal hailed by Democrats and a major labor union.

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'Given the current weakened state of the US economy, we will consider other options if necessary - including use of the TARP programme - to prevent a collapse of troubled automakers,' spokesman Dana Perino said, referring to the Troubled Asset Relief Programme conceived to help financial services firms.

And the US Treasury Department 'will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry', said spokesman Brookly McLaughlin.

Lawmakers are due back January 6.

Ms Perino, speaking aboard US President George W. Bush's official Air Force One jet, declined to say when a decision would come but said the White House understood 'the urgency of the situation'.

The 'weakened state of the economy is such that it could not withstand a body blow like a disorderly bankruptcy in the auto industry', which would 'devastate further an already weakened economy,' she told reporters.

United Automobile Workers union President Ron Gettelfinger welcomed the White House and Treasury announcements as 'great news' but worried about the details and pleaded for the funds to come 'as quickly as possible'.

Mr Gettelfinger said he was unsure 'how much they're talking about, any terms or conditions that are associated with it', and warned that major automakers faced possible 'liquidation' at the cost of millions of US jobs.

Mr Gettelfinger, who has access to the financial records of the Big Three, General Motors will run out of cash before 2009 without government help and Chrysler will not be far behind. Struggling Ford says it is in better shape.

And GM announced on Friday that it was idling 30 percent of its North American production 'in response to rapidly deteriorating market conditions'.

Democratic Senate Majority Leader Harry Reid said he was 'encouraged' by the Bush administration's announcements and 'appreciative of the administration's change of heart' on his longstanding push to use TARP funds.

For months, Mr Bush had categorically refused to tap the TARP to save the iconic US carmakers, but the collapse in the Senate of alternative legislation bringing 14 billion dollars (S$20.8 billion) in bridge loans forced his hand.

The measure would have required the manufacturing giants to engage in painful restructuring to ensure their long-term survival and repayment of the government monies or face bankruptcy proceedings.

The House of Representatives passed the bill on Wednesday, but it collapsed in the Senate on strident opposition from Republicans who blamed unions in a dispute on the timing of bringing their wages in line with those paid by foreign automakers to non-unionsed workers in US states.

Mr Gettelfinger denounced the wage debate as a 'subterfuge' by anti-union Republicans eager to 'pierce the heart of organized labor' and charged that they had demanded more concessions from workers than other parties.

Ms Perino warned that 'while the federal government may need to step in to prevent an immediate failure, the auto companies, their labour unions, and all other stakeholders must be prepared to make the meaningful concessions necessary to become viable'.

And US president-elect Barack Obama, who takes office January 20, urged the White House and the Congress to 'find a way' to provide urgent aid while forcing 'the long-term restructuring that is absolutely required'.

The White House announcement came minutes before the market opened. Wall Street plunged in early volatile trade, with the Dow Jones Industrial Average tumbling 135.96 points, or 1.59 per cent.

The legislation would have provided GM and Chrysler bridge loans to operate until March 31, the date by which they must have crafted a restructuring plan that ensures their long-term survival while repaying government aid.

The bill also required the president to name a special designee, or 'car czar,' who would oversee the process. -- AFP

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