The U.S. Treasury Department has rejected General Motors Corp.’s (GM) request of $10 billion in assistance for its potential merger with Chrysler LLC after the Bush Administration decided it didn’t want to broaden its $700 billion financial rescue program to include industrial companies - or to play a role in a GM-Chrysler merger that could cost the U.S. economy tens of thousands of jobs, The New York Times reported yesterday (Monday).

Instead of direct financing assistance, it looks like the Bush Administration will speed up a $25 billion loan program that was approved by Congress in September and that’s aimed at helping automakers develop more-fuel-efficient vehicles. The program is administered by the U.S. Department of Energy. The administration is also believed to have asked the U.S. Commerce Department to explore other ways that aid could be brought to the automakers - without expanding the scope of the bailout package.

The so-called "Big Three" automakers - GM, Chrysler, and Ford Motor Co. (F) - are in need of government assistance after being pushed to the brink of bankruptcy: Foreign competition and a slumping economy have combined to push vehicle sales down to their lowest level in 15 years.

GM has been in talks with Cerberus Capital Management LP about buying Chrysler since September. But potential investors in the deal have been hesitant to back the merger without the safety net of federal assistance, or a government guarantee of some sort. GM’s inability to secure financing at a time when credit is hard to come by and auto sales are in decline has left the No. 1 U.S. automaker with few options other than appealing to the government.

GM spokesman Greg Martin said in late October that the company had asked the Treasury Department to broaden recently passed legislation, intended to bolster banks and financial institutions, to include auto companies.

In fact, General Motors Chairman G. Richard "Rick" Wagoner Jr. reportedly went right to Treasury Secretary Henry M. "Hank" Paulson Jr. and lobbied for the government to provide emergency financial aid to the Big Three via the $700 billion bailout plan.

Badly in Need of a Bailout

GM desperately needs some sort of outside funding, as the company lost $18.8 billion in the first six months of the year, and is hemorrhaging about $1 billion in cash each month. That has raised the prospect of bankruptcy for the company.