Bush to Steer Course Of Aid to Automakers
Friday, December 19, 2008
The White House was moving closer yesterday to a dramatic restructuring of the nation's ailing automakers, deliberating among several options including an "orderly" bankruptcy in return for an emergency government infusion of billions of dollars.
As the White House raised the prospect of bankruptcy, senior officials at the Treasury Department were coalescing around an alternative that would reshape the companies but not require them to file for bankruptcy protection, sources familiar with the matter said. Secretary Henry M. Paulson Jr. has repeatedly said that federal help for Detroit must put the companies on track for long-term viability rather than simply delay their collapse.
Throughout the financial crisis, President Bush has leaned heavily on the Treasury to develop a preferred course of action. In this case, however, he is being presented with options and will make the ultimate call, said the sources, who spoke on condition of anonymity because the policy is still being reviewed.
White House press secretary Dana Perino said that no decision had been made but that the administration was "nearing a conclusion" and was "very close."
Under a managed bankruptcy or other form of major restructuring, auto workers unions could be forced to make wage concessions, management could be shuffled and investors' stakes punished or even wiped out.
In answering a question at a morning news conference, Perino said: "There's an orderly way to do bankruptcies that provides for more of a soft landing. I think that's what we would be talking about. That would be one of the options. I'm not saying that's necessarily what would be announced."
In the afternoon, the White House described the bankruptcy idea as one of several being considered.
"No one is hinting that is an option preferred more than any other option," said Tony Fratto, another White House spokesman. He noted that bankruptcy had been included as a possible alternative in unsuccessful legislation backed by the administration earlier this month in an effort to provide a $14 billion bridge loan to General Motors and Chrysler. Ford has said it does not need government money at the moment.
Because the next administration will have the task of overseeing the government loan, President-elect Barack Obama's transition officials have been in close contact with the Treasury and White House, several sources said. One government source said that Obama's aides have similar views as the current administration on what to do for the automakers.
Sources familiar with the negotiations between the Treasury and the car companies say that few auto executives are involved and almost all of those who are talking to the department are financial experts. GM has fewer than six people dealing with the Treasury, mostly answering "nuts and bolts and technical stuff," said a person familiar with the interactions.
The administration has yet to reveal any of its plans to the automakers, according to industry and government officials. Nor has the Treasury engaged with the United Auto Workers in the week since the congressional bailout proposal failed -- except for a single conversation that the union's legislative liaison Alan Reuther called a "fact-finding session."
"It's our view that the Treasury should implement the agreement made with the congressional leaders," Reuther said. "We don't think a prepackaged bankruptcy is feasible. We think that would be a horrible blunder. We think the restructuring can and should be accomplished outside of bankruptcy."