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PostSubject: U.S. considers additional aid for industry   U.S. considers additional aid for industry Icon_minitimeSun Feb 08, 2009 2:16 am


U.S. considers additional aid for industry

February 7, 2009 - 12:01 am ET

WASHINGTON (Reuters) -- The Obama administration is talking with U.S auto industry about more help, but no decisions are expected until General Motors and Chrysler LLC submit turnaround plans to the government Feb. 17, a White House official said on Friday.

The Obama administration also confirmed the government's hiring of two law firms to assist Treasury Department officials on auto restructuring matters, but did not divulge plans for naming a trustee or "czar" to oversee the process.

"The administration is engaged at the highest levels -- including the Treasury secretary and the National Economic Council director -- on the issues affecting suppliers, dealers and the industry as a whole," the official said, referring to Treasury Secretary Timothy Geithner and Lawrence Summers, head of the National Economic Council.

"No decisions will be made on restructuring or anything else until we receive and review the restructuring reports due on (Feb. 17)," the official said of the deadline for GM and Chrysler to show progress on meeting cost savings and other targets associated with their $17.4 billion December bailout.

"If the companies have determined some of the targets are not possible to meet in a timely fashion, they have the opportunity to explain their circumstances in their presentation," the official said.

GM and Chrysler have until March 31 to demonstrate to the government that they can be commercially viable. GM and Chrysler told policymakers in December that they faced possible near-term collapse without the aid.

U.S. automotive suppliers said on Thursday they were trying to secure government funding to avoid a deeper industry crisis including possible bankruptcies. Suppliers have presented three options to U.S. officials that, combined, would total aid of some $25 billion.

The official said the Treasury and White House were "in communication with suppliers and the auto companies."

GM and Chrysler bailout funds originated from Treasury's corporate rescue program mainly aimed at failing banks. Another $7.5 billion in capital was directed to financing companies GMAC and Chrysler Financial to stimulate lending to consumers to finance vehicle sales.

Reuters reported on Thursday the government had retained two law firms with bankruptcy experience and the investment bank Rothschild to advise officials on restrucuturing.

New York law firm Cadwalader, Wickersham & Taft LLP will consider possibilities including the prospect of a bankruptcy funded by the government, a person with direct knowledge of the work said.

Cadwalader is joined by Chicago-based law firm Sonnenschein, Nath & Rosenthal and Rothschild in working with U.S. officials as they prepare to review the GM and Chrysler turnaround plans, the person said.

The legal appointments, confirmed by an administration official, appeared to revive the possibility the government could consider a federally funded debtor-in-possession financing for Chrysler or GM in a bankruptcy process.

Some outside experts urged the Bush administration in December to pursue that option, which was opposed by automakers, suppliers, dealers and the UAW.

"Most everyone agrees that the best solution is for them to restructure out of court," Sen. Bob Corker, a Tennessee Republican and a pointman on Capitol Hill on auto restructuring, said in an interview with Reuters.

But Corker doubted whether Chrysler, because of its heavy secured debt, could obtain suitable concessions from creditors. GM, on the other hand, has a debt scenario that was more favorable for court restructuring, Corker believes.

"Maybe that's the only way to go forward. Maybe that increases pressure on bond holders for restructuring GM," Corker said of Treasury's decision to retain bankruptcy experts.

Corker, whose state includes auto assembly operations of foreign makers and some production by domestic companies, believes Chrysler's best chance is to merge.

Some industry officials are concerned the administration has not moved fast enough to name a trustee or czar to oversee auto industry restructuring, influencing efforts at GM and Chrysler to negotiate labor concessions and reach other targets required to be completed by March 31.

Lobbyists and congressional officials had hoped for an appointment by this week, but industry sources said the administration wants to settle on a team, rather than a single individual, to address financial, labor and other issues.

There are also discussions with lawmakers, who want input.

"I think it's important we have the right people. I know they're working actively," said Rep. Sander Levin, a Michigan Democrat.
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