U.S. Automakers May Get Another Lifeline
ROBERT SIEGEL, host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel. At the White House today, President Obama said that he will lay out his plan for General Motors and Chrysler by early next week.
President BARACK OBAMA: What we're expecting is that the automakers are going to be working with us to restructure. We will provide them some help.
SIEGEL: The government has already lent the company $17 billion to stay afloat. But GM and Chrysler still have to solve some big financial problems. By next Tuesday, they are expected to show the government that they can become viable. Frank Langfitt covers the auto industry for NPR, and he joins me now. And Frank, where does all this stand? What's the White House likely to do?
FRANK LANGFITT: Well, you know, the key terms for this huge taxpayer loan was to really slash their costs. And they haven't quite met those conditions yet. And one of the big things is restructuring billions of dollars in debts and obligations. The government seems willing to give some more money with more conditions. But it's not clear.
Are they going to hold this money over the head of the companies or are they going to give some more and set another deadline? You know, one of the concerns here is just dragging this thing out. The bottom line is the government did set a deadline and by all indications, it's going to pass without complete resolution.
SIEGEL: Now, one of the options has been bankruptcy, either for one or both of the companies. And there have been recent reports suggesting that it's not the way they're going. Is it off the table?
LANGFITT: Well, you know, the signs are they're not really considering bankruptcy. One task force advisor last, White House task force advisor, last week, Steven Rattner, downplayed that possibility. But people I talked to still say, you know, it could happen. And President Obama hinted at it today.
Pres. OBAMA: If they're not willing to make the changes and the restructurings that are necessary, then I'm not willing to have taxpayer money chase after bad money.
LANGFITT: And that said, there's no real strong indication right now the White House is thinking this way. Many people who talked to the auto task force warned against it. They said there could be huge job losses, and we're already in a deep recession. But, you know, without the threat of bankruptcy, the White House just doesn't have as much leverage to force some of these deep painful cuts.
SIEGEL: Now, you mentioned that the automakers have not met conditions of the loans that the government made back in December. What's the biggest thing they haven't resolved?
LANGFITT: Well, you know, for GM it's getting rid of debt with bondholders and the union. And essentially this is a $47 billion game of chicken. That's what GM owns - owes the bondholders and the union. It has these obligations to the union for retiree health care. And it wants to give the bondholders about 33 cents on the dollar, the union 50 cents on the dollar and the rest in stock, but both sides are really worried that this stock could be worthless over time.
And right now nobody's budging. They're waiting for a better deal. But as GM is waiting, it's still doing other cuts. Today it announced a 7,500 more hourly workers taking buyouts and leaving.
SIGEL: That's the good one. That's the GM story.
SIEGEL: Chrysler is seen as the weakest of the Detroit car companies. What does the White House see as Chrysler's future?
LANGFITT: Well, the administration seems to realize that Chrysler is just too small and vulnerable to survive on its own, and sees a potential for a kind of long-term viability with a deal with Fiat, you know, the Italian carmaker. And Fiat has offered to bring some small cars to the United States - Chrysler doesn't have a lot of good small cars - and take a stake in the company. But I got to say, Robert, there are real doubts about this.
I talked to someone today who talked to the task force, was asked about it, told them it's a bad idea - too long to get those cars here to the United States, could take two years to get this all going. And last week I was in Detroit talking to a lot of people and just about everyone I spoke with, everybody outside of Auburn Hills, that's where Chrysler's headquarter is, they think that it makes more sense to wind down Chrysler.
And their argument is pretty simple, that in this market and given the economy, and it makes more sense to have two strong companies instead of three potentially weaker ones.
SIEGEL: GM and Ford, as opposed to GM, Ford and Chrysler.
SIEGEL: NPR's Frank Langfitt, thanks a lot.
LANGFITT: Happy to do it.
NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.