Thursday, March 26, 2009
Auto Task Force Set to Back More Loans -- With Strings
Latest Report on the Auto Task Force From The Wall Street Journal
By NEIL KING JR. and JOHN D. STOLL
President Barack Obama last month handed his auto-industry team a seemingly impossible task: to engineer the most complicated industrial restructuring ever attempted by the federal government, and to do it fast.
With almost no experience in the car business, the team's dozen core members have undergone a crash course in the myriad woes plaguing the U.S. auto industry. Within days, just over a month after setting to work, they'll begin announcing decisions.
Interviews with task-force members indicate that the administration doesn't want to let General Motors Corp. and Chrysler LLC slip into bankruptcy protection, a course advocated by some critics of the industry. Instead, the task force is expected to say that it sees viable futures for both GM and Chrysler, but only if there are sacrifices from their managements, unions and GM's bondholders. The team will also lay out a firm timeline for action.
The government is prepared to lend the companies more money. The two companies have requested $22 billion more -- including $9 billion for the second quarter. But the task force may not disburse new aid immediately, choosing instead to preserve that as leverage.
Hanging in the balance are the jobs of 140,000 GM and Chrysler employees, more than 10,000 dealerships across the country, and a large swath of the industrial base in the Midwest.
On Wednesday, the task force met with officials from Chrysler and Italy's Fiat SpA and indicated it is still interested in seeing the two companies form an alliance, as the companies have proposed, according to two people who attended the meeting.
It's clear the team is not yet ready to put forward a comprehensive fix. "It's a steep learning curve that they've been climbing, and there is still a lot to do," said Michigan Rep. Gary Peters, whose district in suburban Detroit houses hundreds of auto suppliers, a few days after meeting with the task force. "That's why I suspect they'll come out with some preliminary statements, and then get back to work."
In session after session in a warren of offices at the Treasury Department, the team has sat through tutorials on dealer financing, studied basic data and debated the future of U.S. car sales. They have spent days trying to understand the complexities of the hundreds of companies that supply the car companies with axles, seats and other parts......More