Obama Panel Visits Detroit as Republicans Urge End to Auto Aid
By Jeff Green and John Hughes
March 8 (Bloomberg) -- President Barack Obama’s auto task force comes to Detroit tomorrow amid Republican calls to let General Motors Corp. go bankrupt and waning public support for giving automakers taxpayer loans they say they need to survive.
U.S. Senator John McCain of Arizona, Senator Richard Shelby, the top-ranking Republican on the Banking Committee, and House Minority Leader John Boehner spoke today against $21.6 billion in new aid to keep GM and Chrysler LLC afloat. GM’s approval rating fell to 32 percent, according to a Rasmussen Reports poll.
GM twice last week reiterated its opposition to bankruptcy and confirmed that position today as $82 billion in losses since the end of 2004 and auditors lack of confidence in its current viability add fuel to the speculation that only Chapter 11 will fix its troubles.
“The best thing that could probably happen to General Motors, in my view, is they go into Chapter 11,” McCain said today on the “Fox News Sunday” program.
Members of the Obama task force that advise on future U.S. Treasury loans are scheduled to visit GM’s Technical Center, including a test-drive of GM’s Volt electric car, and tour a Chrysler pickup factory in Warren, Michigan. They also will meet with executives and United Auto Workers union President Ron Gettelfinger, according to an administration official, who asked not to be named because the plans are private.
Obama’s chief auto advisers, Ronald Bloom, a former United Steelworkers union adviser and previously a vice president at Lazard Ltd., and Steven Rattner, co-founder of private-equity firm Quadrangle Group LLC, will be among the participants, the official said.
The U.S. Treasury agreed to fund a bailout Dec. 19 using the Troubled Asset Relief Program originally established to rescue ailing banks.
Falling Opinion
Among American adults, 32 percent now have a favorable opinion of GM, according to a Rasmussen report of 1,000 adults taken March 5-6 and released today. That’s down from 69 percent two years ago, the survey company said on its Web site. About 64 percent of Americans oppose additional loans, an earlier Rasmussen survey found.
GM is cutting executive pay and will eliminate 47,000 jobs this year, drop U.S. brands and close plants as part of a restructuring required to keep $13.4 billion in U.S. loans. Chrysler, which is owned by Cerberus Capital Management LP, is cutting 35,000 jobs, sold $1 billion in assets and is shedding models to keep $4 billion and solicit $5 billion more.
CAW Concessions
The Canadian Auto Workers union said today it reached a tentative agreement with GM to freeze wages and pensions until 2012 and to require workers and retirees to pay a monthly health- care fee to reduce the automaker’s costs. UAW workers already agreed to pay freezes and other concessions that haven’t been ratified as they discuss changes in a retiree health fund.
The Obama task force trip tomorrow follows two weeks of meetings with auto executives, suppliers, analysts and others as it reviews the two carmakers’ plans to keep $17.4 billion in loans and borrow more.
“I’m glad they are going,” U.S. Senator Carl Levin, a Michigan Democrat, said in a statement last week. “What they will see is a highly modernized auto industry that can compete with the rest of the world if we do what the governments of the rest of the auto-producing countries in the world are doing.”
GM and Chrysler executives met with the committee two weeks ago in Washington to discuss progress and the task force also held talks with the UAW, bondholders, dealers and Fiat SpA, which is proposing taking a 35 percent stake in Chrysler to help it survive if it gets new U.S. loans. Auto-parts makers also are seeking as much as $18.5 billion in support.
GOP Criticism
Shelby said today on ABC’s “This Week” program that “subsidization of anything for very long never works. I’ve suggested they go into Chapter 11. That’s where they belong. And they could reorganize.”
Boehner said on CBS’s “Face the Nation” program that the government shouldn’t give GM any more money until GM proves it can be viable.
GM said Feb. 17 that bankruptcy, even with government support, will be more expensive than a U.S.-funded restructuring outside of court and reiterated that position in statements and interviews March 5 and 6. Chrysler has the same position.
“As we’ve demonstrated through a series of actions, GM is moving quickly and aggressively to restructure the business, and achieving that outside of court remains the best solution for GM and its constituents,” spokeswoman Renee Rashid-Merem said in a March 6 interview. She reiterated that position today.
The cost of a bailout may be rising after industrywide car sales fell to the lowest level since 1981 last month. Unemployment in Michigan rose to 11.6 percent in January, the highest in 25 years and the worst in the nation.
To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net; John Hughes in Washington at jhughes5@bloomberg.net.
Last Updated: March 8, 2009 20:05 EDT |
