May 8, 2009
By Tom Krisher
The U.S. government will not use its stake in General Motors to make
social policy such as offering more fuel efficient vehicles or limiting auto
emissions, the head of a task force overseeing the industry said Wednesday.
Task Force Chairman Ron Bloom told reporters that the management of GM
and Chrysler will be left to their boards of directors. He says policies such
as corporate average fuel economy standards or carbon dioxide emissions
regulations will be made separately by the Obama administration and will apply
to the entire auto industry.
GM and Chrysler have received a total of $65 billion in federal aid, and
both have emerged from Chapter 11 bankruptcy protection. The U.S. government
owns 61 percent of GM and about 10 percent of Chrysler with the Canadian
government.
"To my knowledge we never said 'gee, we ought to go easy on CAFE
because we've got a bunch of money in GM,'" Bloom said.
Bloom, speaking at the Center for Automotive Research Management
Briefing Seminars in Traverse City, Mich., where was on a panel about
government intervention in the auto industry, also said the government is not
currently considering further aid to auto parts suppliers.
Suppliers have been under extreme financial stress as auto sales have
declined in the recession and auto companies have cut production.
But Bloom said the suppliers that have gone into bankruptcy protection
have been able to get financing, and the court process has worked as intended. The
amount of factory capacity in the parts business has to be reduced, just like
it was with the automakers, he said.
"You cannot maintain a supply base for 17 million cars when you're
not selling 17 million cars," he said.
U.S. auto sales had been running below a 10 million annual sales rate
for much of this year until July, when it topped 11 million due mainly to
government incentives to trade in clunkers. But it was 16 million or 17 million
as recently as 2007.
But another speaker, Linda Hasenfratz, CEO of auto parts supplier
Linamar Corp., told the conference that the government should get involved in
helping suppliers obtain financing they need as GM and Chrysler bring factories
back on line.
So far this year 32 suppliers have entered bankruptcy, compared with
eight for the same time last year, and more bankruptcies are expected because
they can't borrow money to ramp up to make parts for automakers, she said.
"We just don't have access to affordable credit," she said.
Suppliers generally are not paid until 45 days after they deliver parts,
so they have to front the money for raw materials and other expenses until they
are paid by automakers.
Banks are reluctant to loan suppliers money or extend terms because of
the distress in the industry, Hasenfratz said. Without government loans or
guarantees, the reduction of factory capacity in the industry might not be
orderly, cutting employment and technology research "for decades to
come," she said.
Bloom also told reporters that the task force's work force will shrink
to fewer than a half-dozen employees as it becomes more of a monitor of the
government's investment in GM and Chrysler.
He said GM likely will sell stock to the public in 2010, but Chrysler will
be sometime after that.
He is confident that the $8 billion the government has allocated to get
Chrysler from bankruptcy emergence to profitability will be enough, saying that
Chrysler saw a sales resurgence in July.
Chrysler's sales for the first seven months of the year are down 42
percent, but its July results were far better, down only 9.4 percent from the
same month in 2008.
"Sales aren't down. Sales are above plan. The whole industry is
down. Chrysler had a pretty good July," Bloom said.
Chrysler, he said, will become a more nimble company with a much faster
vehicle rollout pace than normal in the auto industry. Its new management,
controlled by Fiat Group SpA, will give it a different emphasis on marketing
and products, Bloom said.
Both automakers, although technically private companies, will file
quarterly earnings reports and will voluntarily submit reports to the U.S.
Securities and Exchange Commission, Bloom said.
It's too early, Bloom said, to predict how the government's intervention
in the auto industry will play out. Without government aid, GM and Chrysler
would have been liquidated and the job losses "horrific," he said.
"I hope we draw the conclusion that people came together, made very
difficult decisions and got themselves a new lease on life and took advantage
of it," he said. "I hope that's the lesson that we draw. But history
isn't written yet."
Source: http://www.miamiherald.com/business/breaking-news/story/1172513.html?storylink=pd