22 Mar 2009
March 21 (Bloomberg) -- General Motors Corp. and Chrysler LLC may need "considerably" more than the $21.6 billion in aid they requested, which was based on optimistic recovery plans, said Steven Rattner, the Treasury's chief auto adviser.President Barack Obama's auto task force is assessing proposals from GM and Chrysler to decide whether to recommend U.S. assistance or tip the carmakers into bankruptcy. Rattner made the comments yesterday on Bloomberg Television's "Political Capital with Al Hunt," airing this weekend.
The task force will give its "sense of direction" by March 31, Rattner said. The companies have received $17.4 billion since December and asked for the additional $21.6 billion in aid last month, an amount that depends on achieving turnaround plans that are "somewhat ambitious," Rattner said.
"It could be considerably higher, I won't deny that," Rattner said, when asked whether U.S. aid sought could rise. "Like all management teams they tend to take a reasonably, slightly perhaps, optimistic, view of their business. So it could be more, I can't rule that out."
Greg Martin, a GM spokesman, said yesterday its restructuring plan has "a conservative outlook." The company will continue working with the task force "and we'll keep them informed of our liquidity needs," Martin said in an e-mail.
Chrysler said in a statement that its plan is "realistic" and "conservative."
"With the remaining $5 billion loan request, Chrysler is viable," the company said.
Ford Motor Co., the second-largest U.S. automaker, hasn't requested assistance. GM, the biggest, received $13.4 billion in aid so far and has requested as much as $16.6 billion more. Chrysler got $4 billion and wants $5 billion more. To keep the aid, the automakers must reach cost-cutting agreements.
GM's Talks
Rick Wagoner, GM's chief executive officer, said in an interview March 19 that the automaker hasn't completed talks with the United Auto Workers and bondholders about cutting debt by $28.5 billion. The failure of those talks could drag Detroit- based GM into bankruptcy and possible liquidation, Wagoner said.
Rattner said he may set a deadline for parties including the UAW and GM bondholders to reach a deal.
"Part of why there's a lack of appearance of movement is nobody wants to go first," he said. "You say here's the deadline, everybody has to get there by this date or we're going to do something else."
Rattner said the panel's goal of avoiding automaker bankruptcy if possible wouldn't conflict with efforts to get concessions from bondholders.
Bondholders ‘Difficult'
GM's bondholders "were difficult before we started talking about whether bankruptcy was or wasn't an option. Like all bondholders, like all creditors -- and I'm not being critical -- they have a right to protect their interest."
The bondholders "are looking to the government to help them solve their problem," Rattner said. "The government cannot solve everybody's problems, and we need for the bondholders to become part of this in a constructive way."
There is no deadline now for bondholders to reach an agreement, Rattner said. "In the course of what we say over the next 10 days, we will make very clear what the timetable is, by when it has to happen by, and also what we expect from them."
Advisers to the ad hoc committee of GM bondholders said in a statement yesterday that "there needs to be some level of shared sacrifice" from all stakeholders.
"We would be willing to work around the clock -- lock us in a room with all the parties if you need to -- so we can work toward a solution that's best for GM, the taxpayers and the company's workers," the group said.
Rattner's Background
Rattner, 56, is the co-founder of private-equity firm Quadrangle Group LLC and a former New York Times reporter. He started Morgan Stanley's media acquisitions group in 1984 and moved to what was then Lazard Freres & Co. in 1989. He was named Treasury's adviser on the auto industry last month.
Rattner said in the interview that Chrysler's proposal to give Italian carmaker Fiat SpA a 35 percent stake is "a worthy idea to consider." Chrysler's numbers show the company "just kind of barely making it" as a stand-alone entity and managing to "just kind of inch along."
"There's no real uptick, no real sense that the company would generate meaningful amounts of cash flow on a stand-alone basis," Rattner said of Auburn Hills, Michigan-based Chrysler. "We have not made a determination on whether they could exist on a stand-alone basis, but we do find their idea of partnership with Fiat a worthy idea to consider."
Company Management
Rattner said any decision about GM and Chrysler management would be tied to the ultimate configuration of the companies "and I'm not in a position to comment on that today."
Wagoner and Chrysler Chief Executive Officer Robert Nardelli have been "exceptionally cooperative," "thoughtful," and "energetic," Rattner said.
"They're good guys really trying hard to run those companies," Rattner said. "I have nothing bad to say about them."
GM and Chrysler must be "on a path" to bring wage rates in line with foreign automakers based in the U.S. rather than have those pay rates take effect immediately, he said.
The Treasury Department announced March 19 that U.S. auto suppliers will get as much as $5 billion in aid to avoid a collapse that might cripple the domestic car industry.
