Life & Style | Motoring
Obama considers 'auto industry czar'
Top advisers to President-elect Barack Obama are helping to draft an auto industry rescue plan that would bring new government oversight, including the possibility of an "auto czar" who could ensure the money was being used wisely.
- By Kendra Marr and Michael Shear, Los Angeles Times-Washington PostNews Service
- Published: 19:27 November 15, 2008
Washington: Top advisers to President-elect Barack Obama are helping to draft an auto industry rescue plan that would bring new government oversight, including the possibility of an "auto czar" who could ensure the money was being used wisely.
Aides said Obama is also open to an oversight board that would perform the same function as a single individual. The proposals come as the estimates of the cost to fix Detroit's three largest automakers continue to mount.
"Certainly he wouldn't believe in it being a blank cheque," said one Obama adviser, who requested anonymity to be able to discuss the president-elect's thinking. "He wants oversight to be making sure the auto companies have figured out how to become viable, ongoing concerns."
A few months ago, a $25 billion (Dh91.95 billion) loan package to boost Detroit's production of energy-efficient vehicles seemed sufficient to help automakers and suppliers get over a rough patch and steer the industry towards a greener future. The legislation was rushed through Congress. The Energy Department wrote the rules of the programme in half the time it was allotted.
But since then, the econ-omic downturn has worsened, pulling down auto sales to their lowest level in more than two decades. Like a clunker running on fumes, the industry's latest sputters have signalled a need for more expensive repairs. Not only have prominent Democrats proposed lending another $25 billion to help companies meet their day-to-day expenses, but the United Auto Workers is talking about its own $25 billion injection for a labour-run trust that will take over healthcare costs from the auto companies in 2010.
Aid package
An increasing number of analysts say the cost of reviving the American auto industry is not likely to stop there. Citigroup analyst Itay Michaeli said a General Motors bailout alone would exceed $21 billion. JPMorgan's Him-anshu Patel and Barclays Capital's Brian Johnson both speculate that federal assistance for GM could easily reach $30 billion.
At the pace GM and Ford are currently burning their cash - at a rate of least $4.9 billion a month - $25 billion won't last much longer than five months. And that's not considering what Chrysler might need.
In a letter sent to members of Congress on Monday, GM vice-president Ken Cole called the current situation "unsustainable". Cole said domestic automakers need $25 billion more to address the cost of materials, wages, capital spending for machinery and equipment, upgrading infrastructure, technology research and new vehicle development.
On Thursday, Chrysler chief executive Robert Nardelli said "it would be very difficult to make it through this unprecedented downturn" without help.
How long the government aid might last largely hinges on two factors: the economy and consumer confidence, analysts said. Many estimate that consumers won't be heading back to dealerships until 2010 at the earliest.
Millions of jobs are at stake if any of Detroit's three largest automakers get pushed into bankruptcy. The failure of a collapsed manufacturer could ripple through the supply chain, from auto parts suppliers to dealerships, and even affect Japanese carmakers.
Detroit's auto companies are striving to make it to 2010, when the cost burden of healthcare benefits will be shifted to a UAW trust.
A new $25 billion loan package is likely to face its first vote this week in the Senate.
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