The US government’s “working group” on the automobile industry was expected in Detroit yesterday for talks with representatives of troubled US automakers seeking government help and their unions, an administration official said.
The official, who spoke on condition of anonymity, said the groups would meet with top managers of General Motors (GM) and Chrysler as well as with leaders of the United Auto Workers (UAW) union as they try to chart a way to restructure the two firms to avoid bankruptcy.
The announcement came after GM’s auditors last week voiced “substantial doubt” about the struggling automaker’s ability to survive a collapse of global auto sales amid a deepening recession.
GM chief executive officer Rick Wagoner has repeatedly warned that the largest US automaker would likely be unable to survive a bankruptcy filing because consumers would be unwilling to buy GM vehicles.
GM is funding its operations with US$13.4 billion in emergency loans from the US government and said last month it would need an additional US$22.6 billion in government aid to survive.
But on Friday, it denied reports that it was considering a prepackaged reorganization financed by the government under the “Chapter 11” provisions of the US bankruptcy code as a solution to its financial woes.
However, two top Republican senators on Sunday called for struggling General Motors to seek bankruptcy rather than fresh government aid as the best path to long-term recovery.
“I think the best thing that could probably happen to General Motors, in my view, is they go into Chapter 11,” Senator John McCain told Fox News Sunday.
“They reorganize, they renegotiate their union-management contracts and come out of it a stronger, better, leaner and more competitive automotive industry,” he said.
Richard Shelby, the top Republican on the Senate’s banking committee, said the government should stop propping up the auto industry and giant banks such as Citigroup.
“Subsidization of anything for very long never works,” he said on ABC’s This Week.
“The automobile business, those companies, Chrysler, Ford and General Motors, they’re in deep trouble. We know that. I’ve suggested they go into Chapter 11. That’s where they belong,” he said.
“And they could reorganize. We could get money in place for them. We could do it if they did it and did it right. Short of that, the UAW will run those companies and run them into the ground,” he said.
Meanwhile, the Canadian Auto Workers announced a tentative deal with GM on Sunday to freeze wages and pensions and cut paid vacations as part of GM’s North America restructuring.
In the US, the United Auto Workers last month reached an outline deal to allow Ford to restructure its US$13.2 billion obligation to a trust fund for retirees’ health care benefits.
A similar agreement is expected shortly at GM and Chrysler because the UAW maintains similar contracts at each of the Detroit Three.
One influential Republican, House of Representatives minority leader John Boehner, said bankruptcy was not an option for GM.
“I don’t think they could survive bankruptcy. Hopefully, they’ll be able to come to an agreement with all of their stakeholders before they get to that point,” he said on CBS’ Face the Nation.
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