Obama Outlines Conditions for Continued Aid to Automakers
President-elect Barack Obama said yesterday that the nation's struggling automakers must develop sustainable business models that set realistic production goals focusing on fuel efficiency in order to qualify for continued federal assistance from his administration.
Achieving that will require "everybody -- from labor to management to creditors to shareholders -- giving something up," Obama said during an interview with The Washington Post.
Obama said Lawrence H. Summers, his top economic aide, has assembled a working group to evaluate the state of the U.S. auto industry in anticipation of automakers returning to the federal government for help. "I don't think an acceptable outcome is for us just to keep them on their lifeline through taxpayer dollars in perpetuity," Obama said.
President Bush reluctantly agreed to provide $17.4 billion in federal loans to General Motors and Chrysler last month, allowing the faltering automakers to avoid bankruptcy. As a condition of the loans, Bush demanded broad corporate restructuring and deep cuts in union wages and benefits.
Just over $13.4 billion immediately went to the automakers, and the administration pledged to deliver an additional $4 billion in February. Bush set a March 31 deadline for the companies to submit restructuring plans.
The deal imposed by the Bush administration would require top executives to give up bonuses, bondholders to swap most of their bonds for equity stakes in the car companies, and workers to accept wage concessions that would lower their compensation to the levels of nonunion employees at plants in the United States run by foreign automakers.
If those goals are not met by March 31, Bush said, the government will call its loans and allow the companies to declare bankruptcy or fail.
Obama has the power to restructure the deal once he takes office next week. He said that for too long U.S. automakers survived without paying enough attention to their business plans.
"The only reason that was not apparent is that gas was cheap enough and credit was loose enough that sport-utility vehicle sales could sort of paper over a whole bunch of problems," he said. Noting that SUV sales surpassed car sales last month, Obama expressed concern that the sharp drop in gasoline prices over the past several months could lure Americans back into gas-guzzling vehicles. But he cautioned automakers not to be influenced by that.
"If that's their thinking, that we'll be able to dig our way out of this problem because gas is going to stay at two bucks a gallon, then that would be a premise that I would fundamentally question," Obama said.
-- Michael A. Fletcher