Daily Auto News Obama Drops Car Czar; Will Appoint Team to Restructure Industry
Daily Auto News
Over the weekend the White House announced that President Obama plans to appoint a task force to oversee a restructuring of the U.S. auto industry, rather than concentrating oversight responsibilities in the hands of one person. A proposal to create a so-called “Car Czar” to serve as coordinator of the government’s efforts to remake the auto industry has been dropped.
A formal announcement on the panel, according to Reuters, is not expected today. There is pressure, however, to formalize the government’s recovery strategy quickly. “Car giants General Motors Corp and Chrysler LLC are required to submit new turnaround plans by Tuesday showing how they can be made viable after receiving $13.4 billion in emergency aid in the final weeks of the Bush administration.” Under the terms of those loan agreements, the government has until the end of March to evaluate the companies’ recovery plans and determine whether to allow the companies time to pursue restructuring and repay the debt, or demand immediate repayment and force bankruptcy on one or both automakers to prevent them from digging a deeper hole.
USA Today reports, “The Presidential Task Force on Autos – its members not yet named – will consist of representatives of nine governmental agencies and the White House, and will be run by Treasury Secretary Timothy Geithner and White House economic adviser Lawrence Summers.”
What little is known about the makeup of the panel may foretell what the Obama administration expects the automakers to propose. Barry Hirsch, an economics professor from Georgia State University, tells USA Today that “Bankruptcy or bankruptcy-like proceedings,” are “about the only thing such a committee could do.” He added, “It’s too late for this comprehensive restructuring to take place through negotiation and voluntary agreement among the stakeholders.”
Reuters notes that while the members of the panel have not formally been announced, White House Press Secretary Robert Gibbs has already identified one “senior adviser on the auto crisis” – though it wasn’t clear whether he would serve on the panel or report to it. That person is Ron Bloom, “a restructuring expert who has advised labor unions.” Bloom’s presence also lends credence to the idea that the White House expects the automakers to propose a restructuring bankruptcy backed by government funding as the ultimate solution to their troubles.
The Wall Street Journal notes that Bloom “made a name advising U.S. steelworkers to accept major concessions in several bankruptcy cases…People who know Mr. Bloom expect him to be tough on the auto makers, the United Auto Workers and other parties involved in their restructuring.” Michael Psaros, a co-founder of private-equity group KPS Capital Partners, who has worked with Bloom, told the Journal, “The management of the Big Three are probably not going to like what Ron Bloom has to say; the UAW is not going to like what Ron Bloom has to say; and certainly the stockholders and creditors will not like what he has to say.” But, he added, Bloom has “repeatedly shown an ability to transform struggling companies into profitable going concerns.”
Faced with such grim prospects, automakers are slashing prices on nearly every model. Research the best car deals with U.S. News’ car rankings and reviews.
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