Administration says auto restructuring needed

[February 21, 2009]  WASHINGTON (AP) -- The leaders of President Barack Obama's auto industry task force said Friday the industry urgently needs an overhaul.

The task force, led by Treasury Secretary Timothy Geithner and White House economic aide Larry Summers, met for the first time to review a multibillion-dollar bailout package given to General Motors Corp. and Chrysler LLC and requests for billions in more funding.

Geithner and Summers "emphasized the urgency of the issues affecting the American auto industry and the need for fundamental restructuring," the Treasury Department said in a statement.

The panel "discussed issues including financial and operational restructuring, improving competitiveness of wage and benefit structures, and progress toward creating clean, competitive cars of the future," the Treasury said.

Geithner and Summers asked panel experts for additional analysis and initial recommendations for the group's next meeting, which hasn't been announced.

Obama formed the task force earlier this week after deciding not to appoint an auto czar to supervise the auto companies' restructuring.

General Motors Corp. and Chrysler LLC have received a combined $17.4 billion in federal loans and submitted requests on Tuesday for an additional $21.6 billion. The new requests were included in progress reports required by the government.

GM's Canadian on Friday requested 6 billion Canadian dollars ($4.8 billion) in government loans to maintain production in Canada. The automaker said the additional loan request was proportionate to the $30 billion in loans sought from the Obama administration.

The administration said the task force will be composed of other members of Obama's Cabinet including the secretaries of Transportation, Commerce, Labor and Energy as well as the heads of the president's Council of Economic Advisers, Office of Management and Budget, Environmental Protection Agency and the director of the White House Office of Energy and Climate Change.

Task force designees include Ron Bloom, a Steelworkers union official and adviser to Geithner, Diana Farrell, Summers' deputy at the National Economic Council, Gene Sperling, a former White House economic adviser to President Bill Clinton, and Jared Bernstein, chief economist to Vice President Joe Biden.

They will work with GM and Chrysler, the United Auto Workers union, bondholders, suppliers, dealers and others to force concessions and craft an overhaul of the companies by March 31. If the companies fail to make a convincing case, the Obama administration could pull the loans, which could force the companies into bankruptcy and threaten hundreds of thousands of jobs.

Martin Zimmerman, a former Ford Motor Co. chief economist who teaches at the University of Michigan, said the panel will try to determine how the concessions will mesh with the companies' projections for market share, cost reductions and changes to their distribution networks.

"The real issue is not every individual mark but the totality of the thing," Zimmerman said. "Does it make sense?"

Both automakers have pressing needs. General Motors has said it could run out of money by the end of March and needs $2 billion next month and $2.6 billion in April to remain solvent.

Chrysler has requested an additional $5 billion in loans and wants the government to approve an alliance with Fiat SpA.

Chrysler said in its plan this week that a potential partnership with General Motors was "the best option" for the domestic auto industry from the "financial and operational perspective" but GM "took it off the table."

Michael Robinet, vice president of global forecast services for auto industry consultant CSM Worldwide of Northville, Mich., said one issue confronting the task force is removing factory capacity from the U.S. auto industry. Merging GM and Chrysler would be one way to accomplish that, he said.

"They really have to find the best way to take capacity out of the system. End of story," Robinet said. A merger would be preferable to allowing Chrysler go under because it would preserve Chrysler's Jeeps, minivans and pickup trucks, he said.

---

Associated Press Writers Martin Crutsinger in Washington, Charmaine Noronha in Toronto and AP Auto Writer Tom Krisher in Detroit contributed to this report.

[Associated Press; By KEN THOMAS]

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.