The US Treasury may adopt a plan that would let a car czar or the Treasury Secretary force General Motors Corp and Chrysler LLC into bankruptcy if the automakers don’t show they can survive without government aid, a US senator said.
GM and Chrysler would be required to submit viability plans by March 31 or lose any further US support, Carl Levin, a Democrat from Michigan, told reporters in Detroit on Monday.
The Treasury plan would resemble a measure passed by the US House last week that was rejected by the Senate.
“I expect that the terms would be similar to the ones that were in the House bill,” Levin said.
“The power rests in the hands of either the czar or the Secretary of the Treasury to force bankruptcy by March 31.”
GM and Chrysler are seeking $14 billion to keep operating through the first quarter of next year. Without an infusion of cash, the largest US automaker and Number 3 Chrysler may be only weeks from insolvency.
White House spokesman Tony Fratto declined to speculate on when a plan might be finished, though he said yesterday on Bloomberg Television that the administration wants to make sure taxpayers will get their money back.
“Of course there will be conditions to any taxpayer financing,” Fratto said. “There will be rigorous oversight to make sure that these companies are doing what they promised to do, and we want to make sure that everyone is making the concessions that they’re going to have to commit to make.”
The administration may approve the loans on Tuesday or Wednesday, Levin said. “Everyone knows it’s urgent,” he said. “It’s a matter of weeks before they absolutely must have the funds in hand.”
Treasury Secretary Henry Paulson said on Monday the Bush administration was moving with “deliberative speed” in considering possible financing for US automakers.
“We’ve got some time,” Paulson said in an interview with Fox News and Fox Business Network, according to an e-mailed transcript.
“The terms would be very critical, and we would have to assure ourselves that this was a step on the path to long-term viability,” he said. It was too soon to speculate on what terms might be required of the companies or unions if the government provided aid, Paulson said.
The Bush administration agreed on December 12 to consider options, including use of the Troubled Asset Relief Programme, after Senate Republicans refused to take up the plan passed by the House on December 10. Senate Republicans sought more specific automaker conditions, such as pay in line with foreign manufacturers’ operations in the US
GM spokesman Greg Martin declined to comment on the possible terms of a bailout. “I will say that as other options for aid are considered, our commitment to an aggressive restructuring plan remains unchanged,” Martin said in an e-mailed statement.
Levin said he believes there is $15 billion left in the TARP program to aid automakers’ operations.
South Carolina Governor Mark Sanford, a Republican, asked Bush in a letter yesterday not to consider the bank bailout fund for automakers because it would open the “floodgates” for other troubled industries.
“We are at a tipping point in moving from a market-based economy to a politically based economy,” Sanford said.
Ford’s Stance
House Speaker Nancy Pelosi, a California Democrat, said at a news conference yesterday she expects the White House to approve the money for automakers and that something will have to happen “imminently.”
“All the signals coming from the White House are that they know that bankruptcy is not an option, and that TARP funds are the only recourse that they have,” Pelosi said.
Ford Motor Co., which is not seeking short-term aid, said in a statement it “fully supports and appreciates” the administration effort to aid automakers.
“The U.S. auto industry is highly interdependent and a failure of one of our competitors would have a ripple effect that could jeopardize millions of jobs,” Ford’s statement said.
GM rose 14 cents, or 3.6 percent, yesterday to $4.08 in New York Stock Exchange composite trading. Ford gained 14 cents, or 4.6 percent, to $3.18. GM shares have plunged 84 percent this year and Ford’s have dropped 53 percent.
To contact the reporters on this story: John Hughes in Washington at Jhughes5@bloomberg.net
