US Considers Auto Industry Bailout

Top U.S. officials say the government could come to the rescue of the country's ailing auto companies.

White House spokeswoman Dana Perino says the government has been in talks with General Motors, Ford and Chrysler - once known as the "Big Three." And she says Tuesday the companies may be eligible for help through the $700-billion financial rescue package that Congress passed earlier this month.

Other White House officials say the government could make money available from a $25-billion loan program designed to help the auto industry produce more fuel-efficient vehicles. A third option could involve the U.S. government taking a direct stake in at least one of the auto companies.

That third option has emerged as a possibility during talks between the government and General Motors. GM, the biggest of the U.S. carmakers, has been in talks to merge with Chrysler, the country's third biggest automaker.

Sources close the negotiations have said GM is seeking $10 billion in loans to facilitate the deal.

European Union leaders have also said they might offer loans to the auto industry to help carmakers meet the costs of producing environmentally friendly cars.

A growing number of auto industry analysts have been warning that the combination of high gas prices and the financial crunch could overwhelm the U.S. auto industry. Last week French automaker Peugeot - Europe's second largest car company - warned the global auto industry is in danger of a collapse.

Meanwhile, Japan's second-largest automaker, Honda, announced today its profits have fallen 41 percent due to slumping sales in the U.S. and Europe.

Also today, billionaire investor Kirk Kerkorian continued his effort to dump shares of Ford, the second biggest U.S. car company, to instead focus on the gaming industry and energy.

Kerkorian sold another 26 million shares of Ford today, reducing his stake in the American car and truck maker to less than five percent. Kerkorian began selling off his shares in Ford last week, despite the risk of a half-billion dollar loss on his initial investment.

Despite the hard time for the auto industry, Germany's Volkswagen briefly surpassed oil-giant ExxonMobil today to become the world's most valuable company.

Investors sent Volkswagen's stock prices soaring after an announcement that fellow German carmaker Porsche planned to increase its stake in Europe's largest automaker to about 75 percent.