Politics & Government

Obama officials: No 'magic bullet' for auto companies

GM cars await owners.
GM cars await owners. Bonnie Weller/Philadelphia Inquirer/MCT

WASHINGTON — Top Obama administration officials who oversee the auto industry on Wednesday urged skittish senators to be patient as the White House tries to nurse ailing American auto companies back to health — but they couldn't guarantee success or say when or if taxpayers could get back their investment.

"The Obama administration is a reluctant shareholder in General Motors," said Ron Bloom, a senior Treasury Department adviser, even though it has a 60 percent stake in the bankrupt company.

Bloom, testifying at a Senate Banking Committee hearing on the state of the domestic auto industry, would give no timetables or even assurances the government would get back the $50 billion in aid it's given to GM or the $12.5 billion for Chrysler.

He said his "best judgment" is that no more taxpayer money would be needed, adding that: "I do believe there is a reasonable probability we can get most if not all of our money back."

He emphasized a consistent message about GM: "The government has no desire to own equity stakes in companies any longer than necessary," he said.

Chrysler, which filed for bankruptcy protection in April, is selling major assets to Italian automaker Fiat. As a result, the hearing focused mostly on GM.

GM filed for Chapter 11 on June 1, and company officials hope to create a new company within 60 to 90 days. It will emerge as a private company, and Bloom said "it will take some time" before it can be listed again on a stock exchange, "likely 2010."

Senators were uniformly worried about a future no one can predict, while Bloom tried to be reassuring but often sounded vague.

He couldn't say, for instance, how long government intervention in GM would last, since it depends on unknown factors such as the strength of capital markets.

Meantime, the government hopes to stay out of routine decisions. "As a common shareholder," Bloom said, "the government will only vote on core governance issues," such as the selection of the board of directors.

However, Bloom said, he could see "exceptional cases where the U.S. government feels it is necessary to respond to a company's request for substantial assistance."

He was not specific, saying only that in such cases, the government could "set upfront conditions to protect taxpayers, promote financial stability and establish the foundation for future growth."

Sen. Richard Shelby, R-Ala., top committee Republican, said that while the intention to stay out of most company business "very reassuring," he also was concerned that "if the government intends to be a silent partner of sorts, how do they intend to protect the interests of the American taxpayer as a shareholder. I am not sure you can have it both ways."

He pressed Bloom to describe conditions where more taxpayer funds could be needed. Bloom wouldn't bite.

"It's very hard to speculate about a hypothetical," he said.

Chairman Christopher Dodd, D-Conn., said he understood that the government has an obligation to help bring the companies back to health, and that could even mean more taxpayer aid.

At the same time, he said, quoting the Atlantic Monthly magazine, "We should be concerned lest GM become a kind of economic Vietnam, where the federal government throws good money after bad, year after year, in a vain quest for victory."

What will happen, asked Sen. Michael Bennet, D-Colo., if Chrysler and GM don't become viable companies?

Bloom wouldn't answer, saying only that "the president is highly committed to not having to wander into the middle of a company and take it over."

Senators voiced another concern: The nation's economy remains in recession, and parts suppliers, retirees and newly laid-off workers are all just beginning to feel the effects of the auto restructuring.

"The crisis is playing itself out every single day as auto suppliers struggle to find credit," said Sen. Sherrod Brown, D-Ohio. "If a manufacturer has auto customers, banks seem to put them on a blacklist and do not want to extend any loans . . . ."

Edward Montgomery, the Obama administration director for recovery for auto communities and workers, offered a lengthy list of programs to aid ailing communities.

However, he said, "The administration's approach realizes that there is no magic bullet to transform economies." Remember, he said, "The challenges that they face did not appear overnight and they will not be solved overnight."


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