US Auto Task Force Digs In For Long-Term Role

Latest on the Auto Task Force!

WASHINGTON -(Dow Jones)- 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

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Treasury mulls bankruptcy options for GM, Chrysler

Obama administration says that all options - including bankruptcy - are being considered for the struggling automakers.

NEW YORK (Reuters) -- Outside advisers to the U.S. Treasury are lining up contingency financing options for General Motors Corp. and Chrysler LLC as part of a review of restructuring options for the automakers, a Treasury official said on Monday.

The official commented to Reuters after the Wall Street Journal reported that outside advisers to the Treasury were talking with lenders about financing of at least $40 billion for the car companies, in case the two automakers needed it.

People involved in talks with senior administration officials told the paper that the administration believes that the option of Chapter 11 filings by the two automakers needs to be seriously considered.

"Everything is on the table right now," one person involved in the matter told the paper, adding that President Barack Obama does not want to see more massive job losses in the auto industry.

The Treasury official told Reuters that the action is not an indication of future plans for the companies, but is aimed at ensuring all options are properly considered and made available.

The administration also does not want to anger the United Auto Workers union by appearing to push for bankruptcy, the Wall Street Journal report said, citing the person involved in the matter.

The initial discussions call for private banks to provide the financing known as a debtor-in-possession (DIP) loan with the government guaranteeing or backstopping the loan, the paper said.

In this scenario, some of the financing would be used to pay back the $17.4 billion the government lent GM (GM, Fortune 500) and Chrysler late last year, the paper said.

Treasury advisers are handling the effort and keeping GM and Chrysler informed of the steps through back-door channels, the paper said, citing people familiar with the matter.

Recently, government advisers have aggressively courted big lenders Citigroup Inc. (C, Fortune 500) and J.P. Morgan Chase & Co. (JPM, Fortune 500), which have also received government aid, to participate in any bankruptcy financing, the paper said, citing people familiar with the matter.

Last week, GM and Chrysler requested nearly $22 billion in U.S. government loans, on top of $17.4 billion received so far, and said they had reached tentative deals with the United Auto Workers union to reduce labor costs.

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Is the Auto Rescue Loans In Limbo?

WASHINGTON (AP) — Conservative Republicans admonished the White House Tuesday not to use bank-bailout billions to rescue distressed U.S. automakers, and a key Democrat demanded the government get veto power over the companies' business decisions as a condition of any aid.

The Bush administration said it was still evaluating options and suggested any deal would require major concessions by all sides. Complicating its task, lawmakers in both parties — having failed in their efforts to push a $14 billion auto rescue through a bailout-weary Congress — were pressing for an array of terms and conditions they said should be part of any Plan B.

"We are not going to be rushed into it," presidential press secretary Dana Perino declared.

Only a day earlier, President George W. Bush suggested that a rescue package would come sooner rather than later. "An abrupt bankruptcy for autos could be devastating for the economy," Bush said on Monday. "This will not be a long process because of the economic fragility of the autos."

Still, conservative Republican lawmakers, many from Southern states that are home to Japanese auto plants, wrote to Bush asking him not to use one of the most readily available pots of money — the $700 billion Wall Street rescue fund — to help the U.S. carmakers.

And the White House and Treasury Department were in talks with Sen. Bob Corker, R-Tenn., who has been pressing for big union concessions in exchange for rescue money, on the terms and structure of a possible bailout, said a senior GOP congressional aide.

Corker came close last week to striking a deal with the United Auto Workers union for a $14 billion bill that would have forced the carmakers to bring their wages and benefits in line with those of Japanese auto companies in the U.S. by a specific date in 2009. The measure collapsed after the UAW refused to agree to wage cuts that quickly. The new contacts with the administration were disclosed on condition of anonymity because the aide was not authorized to divulge them.

Rep. Barney Frank, D-Mass. weighed in as well, urging Treasury Secretary Henry Paulson to adopt the accountability provisions included in a House-passed auto bailout bill — the product of a deal with the White House — as a condition of any bridge loans to U.S. automakers. That measure would have given a Bush-appointed overseer say-so over any major business decisions by the automakers while they were taking advantage of federal aid, including the power to nix any transaction of $100 million or more.

"Given the serious mistakes that senior auto industry executives acknowledge they have made in the past, such safeguards are absolutely necessary to ensure that taxpayers are protected and that the retooling of this critical industry proceeds as quickly as possible," Frank wrote to Paulson on Tuesday.

GM and Chrysler have said they will run out of cash within weeks if they don't get help. Ford Motor Co. has said it has enough cash to survive 2009.

Perino said the administration was still working on details of the package, which could reach $15 billion for General Motors Corp. and Chrysler LLC.

She said concessions had to be made in exchange for the money.

"I don't think that there's any possible way that this president would agree to allow taxpayer financing to go toward firms that are not willing to make tough decisions to become viable and competitive in the future," she said.

Bush said Tuesday that his administration was "considering all options" for helping the automakers, arguing that the already distressed economy could slide further into recession without prompt action.

"What you don't want to do is spend a lot of taxpayers' money and then have the same old stuff happen again and again and again," Bush told CNN in an interview. At the same time, he said, "we're trying to get this done in an expeditious way."

The administration indicated it would extend a helping hand to the domestic automakers after an aid effort died in Congress late last week. The White House had wanted Congress to act.

The timing and details of Plan B — the Bush administration stepping in to help the automakers directly — remain in flux. In the absence of action, lawmakers were eagerly offering up their counsel, particularly on the idea of using the $700 billion financial industry rescue fund, known as the Troubled Asset Relief Program, to help U.S. automakers.

"Congress never voted for a federal bailout of the automobile industry, and the only way for TARP funds to be diverted to domestic automakers is with explicit congressional approval," wrote 26 GOP lawmakers, led by Rep. Jeb Hensarling of Texas.

Seven Senate Republicans led by Sen. Jim DeMint of South Carolina fired off a similar missive saying that without restructuring, "we do not believe any amount of money will succeed in saving these companies."...More

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