Some Worry Car Czar Won't Fix Industry Woes

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Congress is on the verge of creating one of the toughest jobs in America: car czar. But will the position come with enough power to force the sweeping changes that are needed? That is one of the questions surrounding Washington's plan to rescue General Motors and Chrysler.

Some Republicans and legal scholars are skeptical, holding up a deal for the struggling automakers.

Mediator Vs. Bankruptcy Judge

The job of the car czar is to "facilitate agreement" on restructuring the car firms, according to a bill Congress and the White House are kicking around. Chosen by the president, the czar would try to work out deals between the companies and its partners, including creditors, dealers, suppliers and the union.

"That sounds much more like a mediator," says Jay Westbrook, who is a bankruptcy expert at the University of Texas at Austin.

Westbrook says the government does not need a mediator — it needs someone who can crack heads.

"They need a bankruptcy judge," he says — or someone with those powers.

For instance, a bankruptcy judge could rewrite a company's costly contract with the United Auto Workers union, make creditors take huge losses to allow an automaker to move forward and even replace management.

Westbrook says the car czar does not have that muscle. That is not to say the job is powerless. It does control the purse strings. If the companies don't make adequate progress in restructuring, the car czar could call in the loans.

"You can say it's going to be lights out for everybody," Westbrook says. "Obviously, the suppliers, the employees, the creditors are going to do very badly if the company failed."

But Westbrook says that is unlikely to happen. He called it the nuclear option, and he said there would be tremendous pressure on a car czar not to yank funding.

"I think for anyone who is politically appointed, to do that will be extremely difficult," he said.

No Incentive To Cooperate

Lynn LoPucki, who teaches bankruptcy law at UCLA, says Congress is doing the wrong thing.

"They're putting the money in first and then they're going to try to get everyone to agree to something," LoPucki says.

He says some of the auto companies' creditors won't have much incentive to cooperate.

"A bond holder need not be concerned at all with the car czar," LoPucki says. "The car czar is supposed to get everybody together in a room and persuade them to agree.

"But there are hundreds of thousands of creditors here. There is no way to put them all in a room, and the car czar doesn't have any power to force them to agree."

Republican lawmakers have similar concerns.

Sen. Robert Corker (R-TN) says Congress had hoped the government restructuring would have the same impact as bankruptcy.

"That is not what this legislation does," he told the Wall Street Journal on Monday.

Congressional sources emphasized that the bill was still in negotiations and elements could change.

Candidates For The Job

So, who might serve as car czar?

Maryann Keller, an auto analyst, says it should be someone who knows industrial companies and can follow the money.

"There is a lot of money that moves around not just between operations, but in the case of General Motors, there is a lot of money that moves around the world," she says.

Keller says a car czar needs the financial smarts to make sure the loans are not wasted or funneled to things that do not directly benefit Americans.

"Do I want this money paid by American taxpayers to enable General Motors to subsidize car sales in China?" she says.

So far, there are no clear candidates for the job.

House Speaker Nancy Pelosi has mentioned former Fed Chairman Paul Volcker, who is also a top adviser to president-elect Barack Obama on fixing the economy. But Volcker has no experience managing a manufacturing company, which is another reminder of just how hard it may be to fill this job.

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