This week the auto companies provided their long term restructuring and survival plans to the new Auto Bailout Task Force. The task force co-chairs, Treasury Secretary Tim Geithner and White House economic adviser Larry Summers, two guys with whom I have little confidence in to do the right thing.
The companies received a $17.4 billion bailout in December and have requested a combined $22 billion more in federal aid to survive. The bailout requires the Obama administration to determine by March 31 whether GM and Chrysler can be competitive and eligible for more government assistance.
The Treasury said members discussed financial and operational details of the companies, as well as efforts to bring unionized wages and benefits in line with those at non- union foreign car companies in the United States, and initiatives to produce more fuel efficient vehicles.
Geithner and Summers sought more analysis from members, as well as their initial restructuring recommendations due at the next meeting. The date was not disclosed.
Geithner and Summers don't have the experience to reform these companies and are likely to throw more money at these fundamentally impaired companies. Someone with industry experience and the independence to make the needed cuts and changes should be incharge. Will Congress and the President realize that a bankruptcy restructuring is needed? The market has spoken.
GM fell 23 cents, or 12 percent, to $1.77 at 4:15 p.m. in New York Stock Exchange composite trading. The closing price was a 71-year low, according to Global Financial Data, underscoring investor skepticism that the largest U.S. automaker can be turned around.
The company’s market value slid to less than $1 billion in intraday trading before finishing the day at $1.08 billion. Five years earlier, the value was $27.2 billion.
Senate Banking Committee Chairman Christopher Dodd said he doesn’t want U.S. automakers to go through a prepackaged bankruptcy or “forced merger.”
“I don’t like that last option,” Dodd, a Connecticut Democrat, said of a forced GM-Chrysler merger in an interview on Bloomberg Television’s “Political Capital with Al Hunt” airing this weekend. “I’m fearful it might turn into just a liquidation; but if it can be done well, it may come to that.”
GM’s 8.375 percent bonds due in July 2033 slid 0.5 cent to 16 cents on the dollar, yielding 52.1 percent, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority.
politically-difficult decision.
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