Obama auto task force: Bankruptcy not goal
March 16, 2009
Obama auto task force: Bankruptcy not goal
By Justin Hyde
Free Press Washington Staff
WASHINGTON – The lead adviser to President Barack Obama’s automotive task force said today that bankruptcy was “not our goal” for the automakers, and indicated the panel wanted to aid auto suppliers facing imminent collapse.
In an interview with the Free Press, Steven Rattner also said the panel was committed to meeting the March 31 deadlines set by the loan deals with General Motors Corp. and Chrysler LLC, but decisions on additional aid could come later. He also offered some critique of bondholders for their position in the restructuring, and said the task force was doing everything it could to save jobs.
“Bankruptcy is not our goal,” said Rattner, a Wall Street dealmaker who was brought in by Treasury Secretary Tim Geithner to help oversee the task force. “I’ve been in and around bankruptcy for 26 years as part of my private-sector work. It is never a good outcome for any company, and it’s never a first choice."
Rattner did say that bankruptcy was “sometimes necessary in order to solve problems that can’t be solved outside bankruptcy. Our goal is to solve them outside bankruptcy to the maximum extent possible, and that’s where our focus is at this moment.”
Facing the worst market for new vehicles in four decades, GM and Chrysler have asked for an additional $21.6 billion, while suppliers have petitioned for up to $25.5 billion in aid, warning of a tidal wave of bankruptcies if help doesn’t come before the end of the month.
“The supplier problem is very, very urgent,” Rattner said. “They have not yet received any government help. They have been left on their own. We need to see if there’s some way to help them that is sound and consistent with our overall approach to this industry.”
But, he added, “we have to be thoughtful about it, because the government can’t be in the business of helping every company in America that gets into trouble.”
Under the $17.4 billion in loans GM and Chrysler received last year, the government must decide by the end of the month whether the companies are making sufficient progress on their turnaround plans. The two had said they would need at least $7 billion by the end of the month, but GM backed away from its request for an emergency $2 billion last week.
Rattner said the panel could go beyond March 31 to decide on the requests for additional aid for GM and Chrysler.
“It’s entirely possible, in fact I think it’s more than likely, that what you will see is not a single announcement at a point in time that’s the beginning of the end of our policy efforts for the auto industry, but rather a series of actions over perhaps a reasonably long period of time to solve this problem,” he said.
The deadline was also supposed to serve as motivation for the UAW and bondholders to make deep concessions called for by the loan deals to push the companies toward. While the UAW has agreed to contract changes at GM and Chrysler, it has not reached a deal over payments for the retiree health-care trust funds.
Meanwhile, bondholders have also not agreed to the two-thirds reduction in debt the companies were required to pursue as part of the loan deals. Rattner said it was understandable that each side would want the other to move first, but suggested there were differences in how each was approaching the talks.
"I think bondholders are being quite difficult," he said. "I’ve been in many difficult discussions with bondholders and this one is certainly right up there. I can’t tell you exactly how or when we’ll reach a meeting of the minds with them. We certainly know what our objective is and sooner or later they will have to recognize it."
As for the union, "I feel the UAW is behaving in a very constructive way," Rattner added. "Whether we will ultimately see eye to eye I don’t know. So far, I’m heartened by that."
Last week, Rattner and three other advisers to the panel traveled to Detroit for a meeting with UAW officials, a drive in a Chevrolet Volt prototype and a tour of Chrysler’s Warren truck plant. Rattner praised the UAW’s efforts and GM’s technology, but said the plant tour drove home what was at stake in the debates.
"As we went through that assembly plant, you saw real people doing real jobs that are now at significant risk," he said. "It reinforced for all of us the importance of doing everything we can to save those jobs.
"I’m not here to promise how many jobs we can save or which jobs we can save, but we’re going to do everything we can that’s fiscally responsible to save them."
Contact JUSTIN HYDE at 202-906-8204 or firstname.lastname@example.org.