Ron Bloom defends bailout, says Big 3 stronger today
August 20, 2011 http://detnews.com/article/20110820/AUTO01/108200315
Ron Bloom defends bailout, says Big 3 stronger today
/ Detroit News Washington Bureau
Washington— Outgoing Obama administration official Ron Bloom said Friday Detroit’s Big Three are in much better shape to weather a downturn in auto sales, and he defended a deal between auto execs and the government to double fuel efficiency standards by 2025.
Bloom, who was the president’s top auto adviser through the industry’s troubled days from July 2009 until January, said General Motors Co. and Chrysler Group LLC are in a stronger position today than the government predicted when it launched their restructuring. Both companies went through bankruptcy, shedding debt as well as plants and workers.
“I think the companies are ahead of where we expected them to be in both cases,” Bloom said in an interview with The Detroit News. He leaves the White House on Wednesday as a adviser on manufacturing policy.
“The results are better than we had forecast. … The companies have done a better job on the cost side, on the product side, and on the pricing side. That’s all good,” he said.
Bloom said the government plans to sell its remaining 26 percent stake in GM “as soon as practicable” — it is waiting for the company’s share price to climb — and rebuffed Republicans’ suggestions that GM and Chrysler could have survived without a government bailout.
GM’s stock price has plummeted in recent weeks. It fell to $22.16 Friday — another all-time low since its public offering in November. GM shares are down 26 percent since July 22.
At current prices, the Treasury would lose more than $15 billion on its $49.5 billion GM bailout.
Last month, the government sold its remaining shares in Chrysler to Fiat SpA. The government recovered $11.2 billion of its $12.5 billion bailout.
‘Industry that’s a winner’
Despite the prospect of a decline in second half auto sales, the U.S. auto industry is prepared for a downturn, Bloom said.
“The industry is far, far healthier now,” he said, adding that global competition is “vicious,” but results in better cars.
“I think for the short run we’ve got an industry that’s a winner.”
Asked if the government, in hindsight, could have restructured the deals to get a larger return for taxpayers, Bloom said yes. But given the same facts in 2009, he said he would have made the same decision.
GM received $30 billion in government exit financing — but was required to repay only $6.7 billion in loans. The government converted the rest of its bailout to stock — including a 61 percent majority stake.
Some Republicans have suggested GM and Chrysler could have survived by undergoing bankruptcy without government financing. Former Gov. Mitt Romney, R-Mass., said the government should have provided guarantees of exit financing – and has argued the government could have saved money.
Bloom rejected that. “There was no — zero, zero, zero (debtor in possession) financing available for a company of this size,” Bloom said. “The idea that there was a free lunch solution, I think, is just really not any near reality.”
The government wasn’t sure if GM could get financing to liquidate in a Chapter 7 bankruptcy. “It might have literally been shut the lights and bring in the auctioneer,” Bloom said. “That was the state of our economy.”
Bloom and other administration officials spent weeks in closed-door talks to reach agreement with nearly all automakers on a deal to double fuel efficiency standards to 54.5 mpg by 2025. That was softer than the original 56.2 mpg proposal floated by administration officials, who also dropped requirements for light trucks from 5 percent annually to 3.5 percent from 2017-2021.
Defending mpg rules
Bloom rejected criticism from Volkswagen AG that the deal tilted toward U.S. automakers and gave incentives to build more trucks, rather than cars. “We’re not trying to tell the American people to buy a car versus a truck,” he said. “We’re asking the manufacturer within that vehicle space to make those vehicles more fuel efficient. … People will decide what vehicle they need.”
He said it is cheaper to boost fuel efficiency in cars than trucks because of the special needs of trucks. “We made no special accommodation to Detroit,” Bloom said. “It happens to be that the Detroit fleets are more truck heavy. But anybody can make trucks. … I don’t think we let anybody off easy.”
Automakers praised the deal — though some in Congress, including Rep. Darrell Issa, R-Calif., argue the deal shouldn’t have been hatched behind closed doors, and could cost auto sales and jobs.
The administration hasn’t declared what the additional mileage mandate will cost the industry and consumers. Bloom emphasized that projections after 2021 could change because of a midstream review to ensure the final years’ standards can be met.
“We are not irrevocably committed to any particular standard in those (final years),” he said, noting the standards could be lowered or raised.
Commuting in his Mustang
Bloom moved to the White House early this year to focus on manufacturing as an adviser to Obama and is returning home to Pittsburgh to spend more time with his wife and two children. He routinely made the 250-mile commute home in his Ford Mustang on weekends.
“I will look for ways to be engaged in supporting the things I care about,” Bloom said, adding that he doesn’t have a new job lined up.
In an interview Friday, UAW President Bob King praised Bloom’s role in the rescue of GM and Chrysler — and the deal to hike fuel economy standards. “Ron was a key player in the whole process,” King said. He praised his role in the fuel efficiency talks, getting environmentalists, automakers and labor to all sign on. “To get all three of us together, it took a master technician and a person that really understood the industry.”