Supplier aid may be decided this week
Supplier aid may be decided this week
As situation worsens, Obama’s car team says it’s ready to make key announcements.
David Shepardson and Gordon Trowbridge / Detroit News Washington Bureau
WASHINGTON — The Obama administration’s auto team told key members of Congress on Tuesday it plans to make significant announcements on the future of the domestic automakers next week, and to their suppliers as early as this week.
Separately, General Motors Corp. and Chrysler LLC — still struggling to win critical concessions from debt-holders and the United Auto Workers — sought to make the case Tuesday that they’re worth saving, and are making progress toward meeting a critical March 31 deadline.
Steve Rattner and Ron Bloom, two top advisers to the Obama auto team, met privately with members of the Congressional Auto Caucus.Though lawmakers said the task force signaled quick action on the supplier issue, it also seems clear that not all endangered partsmakers will be saved.
Rep. Dale Kildee, D-Flint, described the situation as "triage," saying the task force was placing a priority on companies vital to keeping the industry operating.
GM Chairman and CEO Rick Wagoner warned that the situation for suppliers — who have sought at least $18.5 billion in emergency aid — is worsening.
"Hopefully, some help is on the way soon, because I think it’s getting pretty drastic for the suppliers," Wagoner said. .
U.S. Rep. Sander Levin, D-Royal Oak, said Obama’s auto task force leaders indicated "they will say something next week to all of the stakeholders."
"They hope to come forth with a framework and a preliminary assessment of viability, and it will include discussion of any additional resources and the path to viability," he said.
Chrysler Chairman and CEO Robert Nardelli warned that his company will have to file for bankruptcy if it doesn’t receive $5 billion in additional loans by the end of the month; GM’s Wagoner acknowledged that bankruptcy "could work" for his company, but said it isn’t a good option and carries "significant risks."
Nardelli said the company needs a decision quickly on its request for more money.
"Obviously, we have a responsibility to make sure that if the answer is no, which would be devastating, we have to have enough liquidity to make sure that if it is a bankruptcy, we have an orderly wind-down," Nardelli told CNBC.
"We can’t run the checkbook to zero."
Nardelli said Chrysler needs additional aid to its lending arm, Chrysler Financial. On Jan. 16, the Treasury Department agreed to loan Chrysler Financial LLC up to $1.5 billion — a move that has allowed it to boost lending.
The Obama auto team met with Fiat SpA officials Tuesday as they consider whether to approve a noncash deal to give the Italian automaker 35 percent of Chrysler.
GM, which has received $13.4 billion in government loans, has sought another $16.6 billion in aid — though it said last week it no longer needs $2 billion this month. Wagoner declined to say when GM will need more, or how much. But he said the company hasn’t backed off its overall request for additional funds.
Deadline closing in
Both companies must show by March 31 that they can be viable and have concessions in hand from unions and debt-holders required under the terms of $17.4 billion in government loans they received.
U.S. Sen. Debbie Stabenow, D-Lansing, said reluctance among debt-holders is hampering efforts.
"The bond-holders are going to have to come to the table in a more serious way," she said.
Under terms of the agreements with the government, the automakers are to cut their debt by two-thirds. They also must win competitive wage and benefit rates from the UAW and reduce by 50 percent cash payments to a trust fund that takes over responsibility for retiree health care in 2010.
Wagoner said GM needs a different deal with the UAW than the one reached between the union and Ford over a union-run retiree health care fund.
"It probably works for Ford. It does not work for us," Wagoner said, implying the Ford concessions weren’t enough for GM. "So we need to do something different, and we’re working with the UAW on how we might do that."
Wagoner said GM could restructure outside of actual bankruptcy.
"If we were to have to file for Chapter 11, there is no (debtor in possession) financing other than the U.S. government — and that would be a huge, potentially huge amount of financing required," he said.
Restructuring out of bankruptcy court, he said, "makes sense for everyone’s perspective."
"We have to show we can do that, though," Wagoner said.
"I think we can. I think it’s in everybody’s interest, including bond-holders and the (UAW retiree health care trust fund) and others, but it’s not done yet."
Wagoner said the company had studied a pre-packaged bankruptcy filing from which the company could emerge in 30 or 60 days.
"What I’ve learned is, it could work and it might not work. If it doesn’t, it could mean in the end a long period of bankruptcy, which I believe would result in the liquidation of the company," he said.