US Auto Task Force Digs In For Long-Term Role
20 März 2009 - 8:46PM
Dow Jones News
The Obama administration is digging in for a longer period of
oversight of the auto industry than previously thought, recent
actions indicate, reflecting the complexity of its task as well as
the enormous political risks involved.
On Thursday, the Treasury Department sent auto-parts suppliers a
$5 billion lifeline in a move the administration characterized as
the "first piece" of its plans for the industry.
And though the department's auto task force has said to possibly
expect an announcement next week on bailout requests by General
Motors Corp. (GM) and Chrysler LLC, it has cautioned that any such
announcement wouldn't be its final word on the sector.
Adding to the sense of a long-term engagement by the government,
the Treasury's chief auto adviser said Friday those companies may
need "considerably" more aid beyond their current requests of up to
a combined $21.6 billion in new loans.
"It could be considerably higher, I won't deny that," the
adviser, Steven Rattner, said on Bloomberg Television in an
interview that was scheduled to air Friday.
Industry observers have been anticipating March 31 as a sort of
D-Day for the industry, with the government releasing its findings
on GM and Chrysler, including whether the companies should receive
more aid or be pushed into bankruptcy court.
But a task force member, briefing reporters on condition of
anonymity this week because he wasn't authorized to speak on the
record, attempted to tamp down the expectation of a wholesale,
one-shot bailout, instead suggesting a longer, more drawn-out
process.
The adviser said the task force would continue to meet with
stakeholders of GM and Chrysler - including bondholders, dealers,
union leaders and company executives - and closely monitor the
industry, with more action as circumstances dictate. Such an
approach could differ from the government's last intervention in
the sector - the 1979-80 bailout of Chrysler Corp. - and massive
bank bailouts during the current economic crisis.
"I think the approach reflects the inherent complexity of this
industry that's been built up over the last century," GM spokesman
Greg Martin said, referring in part to an intertwined supplier
network that serves both healthy and ailing auto makers as well as
the dynamic between the union and companies dating back
decades.
Rep. Candice Miller, R-Mich., said the task force appears to
grasp the nuances of the industry's problems, an understanding that
she said was missing in debates in Congress late last year.
The task force's deliberative approach fits into that
understanding, she said.
"I don't think we should just be absolutely tied to a March 31
deadline, and I mentioned that" to task force members, said Miller,
who along with other U.S. lawmakers met with the task force this
week. "I'm not one that advocates we have to have everything
determined by March 31. I'm glad that [they're] being very
deliberative."
But the task force's approach also reflects the sensitivity to
many interests needed to restructure the companies - a political
balancing act that requires appeasing powerful groups, including
the United Auto Workers, debt holders, dealers and the companies
themselves.
Sage Eastman, an aide to Rep. Dave Camp, R-Mich., questioned
whether the lengthy time involved in restructuring the industry is
owing more to practical difficulties, "or is it that the solutions
are politically difficult? .. Did the politics complicate the
solutions.
"You could probably get a bunch of experts and economists around
the table and say, 'Here's what it's going to look like,'" Eastman
added. But taking many of those steps would be politically
difficult.
Such difficulties were on display this week when the UAW's chief
lobbyist sent a letter to U.S. lawmakers accusing bondholders and
other lenders to GM and Chrysler of stalling a debt-swap deal
needed to win more federal aid.
In the interview with Bloomberg TV, Rattner said bondholders
needed to become more "constructive" in debt negotiations.
GM bondholders, Rattner said, "are looking to the government to
help them solve their problem. The government cannot solve
everybody's problems, and we need for the bondholders to become
part of this in a constructive way."
GM has said it expects to reach deals with the bondholders and
the UAW before March 31. Chrysler also has said it expects to have
its final restructuring plan in place by then. The Treasury has the
option to extend that deadline by one month under the terms of
loans GM and Chrysler already have received.
In his interview, Rattner said he may impose a deadline on GM
bondholders and the UAW to come up with deals on concessions. "Part
of why there's a lack of appearance of movement is nobody wants to
go first," he said.
-By Josh Mitchell, Dow Jones Newswires; 202-862-6637;
joshua.mitchell@dowjones.com