Saturday, March 21, 2009

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@

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