Despite the abrupt death last night of bailout legislation in Congress, it seems the Big Three car makers will still get billions of dollars in rescue funds from Washington. 

The Treasury Department said Friday it will provide an unspecified amount of money to the cash-strapped industry, FOX Business Senior Washington correspondent Peter Barnes has learned from a source close to the discussions. It was not immediately clear from which funding source Treasury would get the money. 

Still, industry experts are deeply skeptical that emergency cash is the answer to the myriad ills plaguing the industry.

“They’ll get the money, but it’s a very dangerous proposition. It’s a very complicated mess,” said David Magee, author of How Toyota Became #1.

In the wake of the failure of a $14 billion bailout bill in the Senate Thursday night, the Treasury Department said Friday it was prepared to step in and prevent a collapse until Congress takes up the issue again.

Sen. Harry Reid, D-NV

General Motors (GM) and privately held Chrysler have both said they could run out of cash within weeks if no help arrives in the form of taxpayer help.

But Magee said General Motors specifically and the industry in general suffers from a “credibility” problem.

General Motors, by far the largest of the Big Three, has been badly mismanaged, according to Magee, and needs a shakeup in leadership if it is to be trusted with billions of dollars in taxpayer dollars.

Magee also said he’s skeptical that layoffs resulting from the collapse or bankruptcy filing of one or more car companies would be as devastating as the industry has claimed.

“If the jobs weren’t in play I think everybody would have already walked away from this.

But there’s a credibility issue, they’re using scare tactics. The job losses would be significant and painful, but they’re painting a worst, worst case scenario,” he said.

By some estimates, as many as 3 million jobs could be at stake next year if the companies are left to fend for themselves.

The Congressional legislation failed after talks broke down over the refusal of the United Auto Workers union to meet Republican demands for aggressive wage reductions. The Senate rejected the bailout 52-35 on a procedural vote -- well short of the 60 required -- after the talks fell apart.

Jason Smith, finance manager with Grote Automotive, a car dealership in Fort Wayne, Ind., said Congress’ reluctance to hand over billions of dollars is probably well placed.

Politicians were right, he said, to seek guarantees and milestone requirements from the industry in return for emergency loans. “I think what Congress was asking for was legitimate. ‘What are you going to do with the money?’” he said.

Bankruptcy is a frightening prospect for any of the companies, and the broader economy, as a whole, Smith observed. But it might be necessary to prompt industry leaders into taking necessary measures.

“If they go bankrupt, they’ll do some of the things they’ve needed to. But it will be very costly. A lot of people will be hurting,” said Smith.

General Motors and Chrysler are in the most immediate danger, while Ford Motor Co. has said it does not need federal help now, but could face collateral damage if one of its domestic rivals fell. With the economy in recession, the auto industry has struggled with lackluster sales and choked credit markets.

Ron Gettelfinger, UAW President

Detroit’s carmakers employ nearly a quarter-million workers, and more than 730,000 others produce materials and parts for cars.

The White House said it was disappointed by failure of legislation that “presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds only go to firms whose stakeholders were prepared to make difficult decisions to become viable.”

Many congressional Republicans and some economists said the companies would be best to pursue a prearranged bankruptcy that would allow them to restructure quickly. But most Democrats and the carmakers rejected that, arguing it would quickly lead to liquidation because consumers would never buy cars from a bankrupt auto company.

As it lobbied unsuccessfully on Thursday, White House officials said the weak economy couldn't afford the collapse of the auto industry. President-elect Barack Obama said an industry shutdown would have a “devastating ripple effect” on the already battered economy.

GM said in a statement is was “deeply disappointed” that the bipartisan agreement faltered. Chrysler said it was also disappointed and would “continue to pursue a workable solution to help ensure the future viability of the company.”

An agreement on legislation was close, but it stalled over the UAW's refusal to agree to wage cuts before their current contract expires in 2011. Republicans, in turn, balked at giving the automakers federal aid.

Smith, the Indiana car dealer, said U.S. car makers need to cut costs if they hope to become competitive again with foreign companies.

“The problem is the cost – health care, retirement wages. Unless they can figure out some way to get that cost in line and be competitive, I don’t know whether things are going to change,” he said.

Aid to the automakers gained urgency last week when the government reported the economy had lost more than a half-million jobs in November, the most in any month for more than 30 years.

The stunning disintegration of the auto bailout proposal was eerily reminiscent of the defeat of the $700 billion Wall Street bailout in the House, which sent the Dow tumbling and lawmakers back to the drawing board to draft a new agreement to rescue financial institutions and halt a broader economic meltdown. That measure ultimately passed and was signed by Bush.

Magee said the politicians in Washington likely learned from that earlier experience – and consequently acted with greater caution when dealing with the auto industry.

“This has forced Washington to start asking some tough questions on both sides (Republicans and Democrats)” he said, “They’ve shown some real leadership and it’s about time.”