BY JUSTIN HYDE • FREE PRESS WASHINGTON STAFF • January 22, 2009
WASHINGTON -- The Obama administration will require substantial changes from the U.S. auto industry and assemble a team of people to oversee the government's rescue package, the nominee for U.S. Treasury secretary told a Senate committee Wednesday.
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Timothy Geithner told the Senate Finance Committee that any aid to automakers should be "in support of a comprehensive restructuring that will leave the industry in a stronger financial position where they can be profitable and healthy without government support."
"That's going to require very, very substantial changes by all stakeholders," he said.
He did not elaborate on details and wasn't pressed on the issue by senators.
Geithner, who has played a key role in the $700-billion bailout of financial markets as president of the New York branch of the Federal Reserve, said the Obama administration was building a team with "expertise in manufacturing, in restructuring, who understand how these labor contracts work."
The question was spurred by Sen. Jeff Bingaman, D-N.M., who asked how Fiat SpA could arrange for a large stake in Chrysler LLC without providing any cash. Under the outlines of the agreement announced Monday, Fiat will get 35% of Chrysler, with an option to boost its stake to 55%.
Chrysler received a $4-billion loan from the Treasury and has pressed for $3 billion more, although the Bush administration didn't commit to more money.
"It's hard to explain to the American taxpayer why the taxpayer shouldn't own Chrysler," Bingaman said
Geithner did not expand on his comments, and no other member of the committee asked about the auto industry question. The only other person mentioned so far as a possible member of such a team is New York financier Steven Rattner, whom auto industry officials say has been mentioned as a possible overseer, or czar, for the industry's loans.
To date, the Treasury has lent $24.9 billion to General Motors Corp., Chrysler and finance firms GMAC and Chrysler Financial. Only GM is publicly traded; the rest are controlled by private equity firm Cerberus Capital Management. Ford Motor Co. has said it could use a $9-billion line of credit, and Ford Credit has asked regulators to take steps to help its lending business.
In a symbolic move, the U.S. House passed a bill Wednesday that would reaffirm the loan conditions that the House approved last month, as part of limits it wants on how the remaining $350 billion in the financial industry bailout is spent.
U.S. Rep. Barney Frank, D-Mass., said the Senate would not take up the bill and it would have no effect on the auto loans, but that passing it was necessary to make the House's intentions clear to the Obama administration. The bill would require details from banks about how they're using their bailout money and set aside up to $100 billion to stem foreclosures.
Frank had been critical of many of the labor restrictions made in the auto industry loans by the Bush administration -- namely, requiring the UAW to work toward the goal of matching the wages and benefits of workers at foreign-owned plants by the end of the year.
"I'm sure Obama will change those," he said.
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