Coming to Detroit's Rescue?

But Daniel Mitchell, a senior fellow at the Cato Institute, said the government bailouts did not offer deteriorating companies the right incentives to improve business.

"When you have taxpayers come in and bail out Detroit, you in effect are sending a message: You don't need to make yourself more efficient to meet the challenge of foreign competition. You just need to hire the right lobbyists and influence-peddlers in Washington to get money for you," he said.

Over the past few weeks, auto companies have been meeting with Treasury officials. In recent days, GM chairman and chief executive G. Richard Wagoner Jr. has been lobbying officials from the Energy and Treasury departments for quick relief.

"Automakers do have financing arms, many of them do," White House press secretary Dana Perino said yesterday. "And it's possible that some of those financing arms could be a part of the rescue package . . . That's one of the reasons Treasury has been in contact with them."

The Treasury confirmed that statement but noted that such companies are ineligible for the capital purchase program, in which the government has been providing investments in exchange for ownership stakes in banks.

"Basically, they're not banks," said an official familiar with the Treasury's policy who spoke on condition of anonymity because the person was not authorized to speak.

It is unclear how the Treasury would directly aid automakers. But the department could buy troubled auto loans from them, freeing much-needed capital.

Scott Talbott, vice president of the Financial Services Roundtable, said automakers finance so many loans that they are just as important as banks.

"The goal of the Treasury program is not to save companies but to restore liquidity," he said. "We think [rescue package] money should be distributed to those financial service companies that have a direct lending relationship with consumers, such as Ford and GM, their auto-finance arms."

Analysts said any relief would be good news for Cerberus Capital Management, which owns 51 percent of GMAC and all of Chrysler Financial. Last year, Cerberus purchased a majority stake in Chrysler, and now it's looking to unload the ailing automaker. The government's help means Cerberus would be free to funnel money into a GM-Chrysler merger.

Michigan officials said the federal government had to step in. Too much is at stake.

"Look at the footprint the auto industry has on our economy," said Liz Boyd, spokeswoman for Michigan Gov. Jennifer M. Granholm (D). "It is critical the federal government help this industry in a time of transition."

Staff writers Peter Whoriskey, Binyamin Appelbaum and Dan Eggen and staff researcher Julie Tate contributed to this report.