Wagoner sounds alarm on suppliers
March 18, 2009
Wagoner sounds alarm on suppliers
Situation gets drastic, he says in D.C.
BY JUSTIN HYDE
FREE PRESS WASHINGTON STAFF
WASHINGTON — General Motors Corp. Chairman Rick Wagoner warned Tuesday that the financial stability of U.S. auto suppliers was "getting more precarious," and that a GM bankruptcy could lead to the company’s demise.
Wagoner’s comments came as President Barack Obama’s auto task force told a group of Michigan lawmakers that the team would present a plan for addressing the crisis in the U.S. auto industry as soon as next week, with more substantial details to follow.
"They’re going to come up with a way to say something clear to all the stakeholders," said U.S. Rep. Sander Levin, D-Mich., who was among the state’s lawmakers in the task force meeting.
Wagoner met with the task force Monday, part of a series of meetings to review GM’s bid for an additional $16.6 billion in loans. The automaker received $13.4 billion in loans in December.
"The longer the industry runs at lower production levels, the greater the concern grows," Wagoner said at a breakfast sponsored by the Christian Science Monitor. He added, "Hopefully, some help is on the way soon, because it’s getting pretty drastic for suppliers."
Steven Rattner, the chief adviser to the Obama auto task force, said Monday that the panel was exploring ways to help suppliers, who have asked the government for up to $25.5 billion in aid.
Rattner told the Free Press on Monday that bankruptcy was not the goal of the task force, and Wagoner said Tuesday that GM can accomplish 99% of its restructuring without court oversight.
"It makes sense from everyone’s perspective to do this outside of court," he said.
Wagoner also said that though GM had studied prearranged bankruptcy, such a move "could work, and it might not work, and if it doesn’t it could mean in the end a long period in bankruptcy, which I believe would result in the liquidation of the company."
GM has been locked in talks with the UAW and bondholders over its plans to reduce its debt by two-thirds and have the UAW take stock for half the cash it is due as part of transferring responsibility for the retiree health care trust fund set up under the 2007 contract.
Ford Motor Co. and the UAW reached a deal last month to do just that, but GM had pushed for more flexibility in its payments.
The Ford agreement "does not meet our needs at all," Wagoner said. "We need to do something different, and we’re working with the UAW on how to do that."
He declined to address the status of talks with bondholders, who said Monday they had submitted a proposal to meet the goals GM and the government had laid out. But Wagoner did say he thought a deal could be completed without some government assistance such as guarantees for GM’s debt that some analysts have suggested.
Wagoner also reiterated that GM had not yet updated its request for federal aid beyond waiving off a request for $2 billion before the end of the month, saying cost cuts and some better-than-expected revenues drove the move. The company is required to provide weekly updates on its financials to the government under its loan deals.
"I can’t really tell you when we need the money," he said.
Lawmakers who attended the meeting with the task force advisers Tuesday said they were committed to producing some kind of framework for industry aid.
Sen. Carl Levin, D-Mich., said he had "confidence that they’re trying very hard for the auto industry to succeed, and that bankruptcy is not the goal here. I expect that there will be a significant statement by the end of next week relative to restructuring for economic viability."
Contact JUSTIN HYDE at 202-906-8204 or email@example.com.