Senators warn Geithner against letting GM boost imports

May 20, 2009

 

Senators warn Geithner against letting GM boost imports

 

By Justin Hyde

Free Press Washington Staff

Key senators warned Treasury Secretary Tim Geithner today that the administration faced a "firestorm" if General Motors Corp. was allowed to boost imports from foreign countries while receiving billions of dollars in government aid.

Geithner, speaking to the Senate Banking Committee, said the Obama administration was "trying very carefully" not to get involved in decisions by GM and Chrysler LLC to close plants or cut dealerships as part of their government-funded turnaround. The UAW had attacked GM’s plans to boost imports from China, Mexico and South Korea through 2014 while closing 16 plants in the United States and shedding 21,000 U.S. manufacturing jobs.

"If it was a firestorm in this country when we give billions to banks and they pay huge bonuses, you haven’t seen anything yet for what’s going to happen if we put billions in auto companies and they open plants in China," said Sen. Sherrod Brown, D-Ohio.

Geithner defended the administration’s work, saying it was making "extraordinary" efforts to save the domestic auto industry, and that the plans for GM would become clearer in the coming weeks.

"Our job is to make sure that the overall plan leaves these companies in a position where over the longer term they emerge viable," he said.

In prepared testimony for the Senate Banking Committee, Geithner did not indicate any decision on whether to push GM into bankruptcy around a June 1 deadline. Sen. Chris Dodd, the Connecticut Democrat who heads the committee, said he would hold a hearing shortly after the deadline on the administration’s plans for the industry.

Geithner oversees the Obama administration’s auto task force, which has called for steep cuts in debt at both automakers as a condition of any additional government aid, with bankruptcy as a tool to enforce a chosen plan. Treasury has pledged $8 billion toward Chrysler’s restructuring, and GM has said it would need an additional $11 billion.

"The Administration’s commitment to the American automotive industry has given both GM and Chrysler a new lease on life, preventing plant and dealership closings on a massive scale and saving tens of thousands of jobs across the country," Geithner said.

The Obama administration has come under growing questions from members of Congress over Chrysler and GM’s decision to cut nearly 1,900 dealerships and protests spurred by the UAW over GM’s production shifts. GM contends imports as a share of its sales in the United States won’t change under its plan; it will make up for the increase in imports from Asia with cuts in imports from Canada and elsewhere.

In response to a question from Sen. Jim Bunning, R-Ky., Geithner said the administration wanted to leave those calls to management while verifying that the results would leave the companies viable.

"We are trying very carefully not to be involved in those decisions," he said.

Those answers did not satisfy some senators, who warned that the public would have little appetite for bolstering auto production in foreign countries.

"If we’re putting taxpayers into a company that’s going to transfer those jobs to China, I don’t want to do it," said Sen. Jon Tester, D-Mont.

The task force and GM bondholders have been at odds over Treasury’s proposal to swap $27 billion in GM debt for 10% of a reformulated GM. Treasury would own the majority of the automaker in return for canceling part of the $15.4 billion already lent to the company, while a health care trust fund for UAW retirees would own 39%.

Now look at Corker’s interest, not the well being of the Spring Hill plant and its workers, but interest for the bondholders, and attacking the UAW

Sen. Bob Corker, R-Tenn., questioned the bond offer from Treasury, saying it appeared politically motivated to favor UAW retirees over GM bond holders, and that even with the exchange GM would hold $80 billion in debt.

"I’m asking you to consider fairness when you make the offer again, because you are going to have to make another exchange," Corker said, "and that you treat other retirees that have invested in these bonds, and not do it in such a politically motivated way."

Corker’s first interest should be Spring Hill!

 

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