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‘Car czar’ proposed to oversee US auto bailout

‘Car czar’ proposed to oversee US auto bailout
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First Published: Sun, Dec 07 2008. 12 16 PM IST
Updated: Sun, Dec 07 2008. 12 16 PM IST
Washington: A government “car czar” would oversee any bailout of US automakers under proposed terms being negotiated by the White House and Congress for extending up to $17 billion in emergency loans that mainly aim to spare General Motors Corp and Chrysler LLC from bankruptcy.
Congressional and other sources familiar with the plan for oversight by an official within the executive branch said on Saturday that conditions were not final as Democratic leaders and the White House tried to cut a deal.
White House spokeswoman Dana Perino told reporters the assistance would only be considered for companies “willing to make the difficult decisions across the scope of their businesses to be viable and competitive” and in cases where strong taxpayer protections could be guaranteed.
Reeling from a plunge in sales they blame largely on the credit crunch and recession, once-vaunted GM, Chrysler LLC and Ford Motor Co sought $34 billion from Congress this week to forestall possible collapse.
There is wide concern that insolvency at one of the big manufacturers would devastate the deeply interconnected industry, including suppliers and dealers.
Senate Banking Committee Chairman Christopher Dodd of Connecticut and House Financial Services Chairman Barney Frank of Massachusetts took the lead in writing legislation for majority Democrats.
‘Car Czar’ proposal
One leadership aide said both sides favored creation of a “car czar” role within the executive branch to oversee funds and ensure conditions were met.
Congressional aides and other sources said negotiators and the White House were trading draft proposals, and planned to work through the weekend.
The details were to supplement a framework struck late on Friday on the amount of aid - up to $17 billion - and the source of funding, an Energy Department loan program approved in September to help automakers make more fuel-efficient cars. The bridge loans are designed to carry industry into spring.
The impetus for the bailout breakthrough was an unexpectedly sharp downturn in US unemployment in November, which made lawmakers fear thousands of US auto industry workers could soon be added to the jobless rolls. Employers slashed more than 533,000 jobs last month, the highest monthly decline in 34 years.
GM, Ford and Chrysler employ nearly 250,000 people and say millions of other jobs depend on their survival.
The Detroit Three are weighed down by overcapacity, high healthcare and retirement expenses and high operating costs, as well as eroding market share due to competition from healthier foreign rivals like Toyota Motor Corp.
Strict terms
Their slide accelerated in the second half of this year when record high gas prices undercut sales of bread-and-butter sport utility vehicles and pickup trucks.
Chrysler Chief Executive Bob Nardelli told a congressional committee on Friday the company needed $4 billion to survive through March. His counterpart at GM, Rick Wagoner, said his company needed $10 billion over the same time frame.
Ford wants a $9 billion line of credit that would only be tapped if its finances deteriorate more than expected in 2009. Chrysler is also seeking more cash for operations into 2009 and GM wants a credit line as well.
Senior lawmakers hope next week to present a proposal for votes in both the House of Representatives and the Senate where there has been widespread skepticism about a bailout.
The companies have said they would accept strict terms as conditions for aid. GM and Chrysler said they would go so far as to reconsider a merger if it meant getting federal funds. Congress is not expected to demand such a step this time.
Nevertheless, aid for GM is expected to kick off a restructuring process that will resemble a bankruptcy proceeding but under the oversight of appointed officials rather than a federal judge.
Depending on terms, the $2.5 billion of GM’s market value could be wiped out for shareholders. The automaker is working to slash $30 billion in debt and could offer equity to existing creditors, including the United Auto Workers.
The union, which has lost over a third of its membership this decade, has signaled that it will accept deep concessions now in a bid to save GM and Chrysler.
Other conditions favored by many lawmakers included limiting executive compensation, imposing strict loan repayment terms, and protections for taxpayers that might include an equity stake in a restructured company.
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First Published: Sun, Dec 07 2008. 12 16 PM IST
More Topics: Autos | Bailout | US | Economy | Financial Crisis |