Obama wants more reform from GM, Chrysler
The two automakers seek additional $22 billion from the US, even as the president signals their plans aren’t adequate.
The troubled firms have made serious efforts to reform, and the White House has said it believes the US can have a successful auto industry.
But GM and Chrysler “aren’t there yet,” said Mr. Obama in an interview with CBS News’ Bob Schieffer that was broadcast on “Face the Nation” on March 29. “We think we can have a successful US auto industry. But it’s got to be one that’s realistically designed to weather this storm and to emerge, at the other end, much more lean, mean, and competitive than it currently is,” he said.
Right now, the “Troubled Two” of the Big Three are surviving on $17.4 billion in government loans provided in the last months of the Bush administration. But given the current collapse in auto sales, they need more – much more. GM is seeking an additional $17 billion. Chrysler wants another $5 billion.
(Ford has said it has enough cash reserves to ride out the current downturn, so it is not applying for direct government loans.
Both GM and Chrysler outlined deep cuts in product lines in restructuring plans filed with the federal government in February. GM is proposing to cut upward of 20 percent of its work force and to focus on Chevrolet, Cadillac, GMC, and Buick as its main brands. Chrysler, among other scenarios, is discussing a plan for the Italian automaker Fiat to take a 35 percent stake in the company, providing it with much-needed small-car technology.
“We try to update the Treasury almost weekly” on company cash flow, said Mr. Wagoner.
The members of the administration’s auto task force, for their part, are e-mailing auto executives with questions on nights and weekends, suggesting that they are hard at work, said Wagoner.
The president’s suggestion that more work needs to be done may in fact not be directed only at the auto firms themselves. The United Auto Workers union and bondholders of the auto firms may be the administration’s real targets.
Under the terms of their original government loans, GM and Chrysler are pushing the UAW for concessions, such as acceptance of stock in exchange for half of the payments into a union-run trust fund for retiree healthcare.
Both companies also are supposed to reduce their debt by two-thirds, in part by persuading bondholders to accept stock instead of cash for some of their financial claims.
The UAW has not yet signed off on the trust fund deal, however. Perhaps even more important, bondholders have been resistant to accepting stock in return for debt owed.
In fact, a rollover of some auto industry debt scheduled for June may be a more important deadline than the administration’s March 31 date, by which GM and Chrysler were supposed to have their restructuring plans in order.
If the firms are to qualify for more government aid, management, labor, shareholders, creditors, suppliers, and dealers all will have to make concessions, say administration officials.
“We’re prepared as a government to help that process if we believe it’s going to provide a basis for a stronger industry in the future that’s not going to rely on government support,” said Treasury Secretary Timothy Geithner in a broadcast interview on ABC on March 29.
Associated Press material was used in this report.