February 24, 2009 at 12:22 pm

Obama sets GM, Chrysler talks

Officials say president's auto team to meet with execs this week

WASHIINGTON -- The Obama administration's auto team will hold face-to-face talks with top executives from both General Motors Corp. and Chrysler LLC this week, even as the automakers face down a March 31 deadline to win key concessions from the UAW and bondholders.

GM Chairman and CEO Rick Wagoner, Chief Operating Officer Fritz Henderson and Chief Financial Officer Ray Young are to have a lengthy meeting Thursday with key members of the administration's auto restructuring team, people familiar with the meeting said Monday.

Two administration officials confirmed that auto team members from the Treasury and the White House's National Economic Council will meet with GM and Chrysler executives this week. The initial face-to-face session is expected to focus on questions surrounding the restructuring plans submitted to Treasury on Feb. 17.

One of the urgent issues under discussion is the immediate cash needs of both automakers.

GM and Chrysler last week asked for billions in new loans by next month, warning they will have to file bankruptcy protection without another infusion of cash.

GM said it needs $2 billion in March and $2.6 billion in April on top of the $13.4 billion the automaker has already received in loans from the federal government.

Chrysler said it needs another $5 billion on top of the $4 billion it has received in government aid.

As part of their loan agreements, both companies must prove they are viable and win billions in concessions from the UAW and bondholders.

This week's meetings with the Treasury Department and White House's National Economic Council auto teams also will include other stakeholders, which are expected to include bondholders, dealers and the United Auto Workers.

The National Automobile Dealers Associations, which represents nearly 20,000 dealers, said its top officials will meet with the Obama administration auto team this week, as well.

"NADA realizes this task force is critical to the industry and we appreciate the fact that we get the opportunity to sit down to talk about the retail side of the business," said Bailey Wood, a spokesman.

Auto team expanded

The White House on Monday confirmed it had expanded its auto team, naming a private equity investor as the head of the Treasury Department's auto efforts.

Steve Rattner, managing partner of a $6 billion New York hedge fund, will join the Treasury Department as counselor to Secretary Timothy Geithner, "where he will serve as an adviser on a variety of economic and financial matters, and will lead the Treasury's efforts with regard to the automobile sector."

Rattner will work with Ron Bloom, a special assistant to the United Steelworkers president, who is working as a special adviser to the Treasury on auto issues. Bloom, a former investment banker, has been involved in dozens of complex union negotiations.

Geithner and White House National Economic Council director Larry Summers will co-chair the Presidential Task Force on the Auto Industry.

Geithner is the president's designee for purposes of enforcing the $17.4 billion in loan agreements with GM and Chrysler and could call back the loans on March 31 if the companies haven't made significant progress.

Rattner, a former New York Times reporter, had been widely viewed as a candidate for car czar in recent months. Rattner was managing principal of Quadrangle Group LLC, which has investments in at least 20 media and communications companies as part of its private equity business.

First face-to-face talks

The Treasury Department has had an auto team since late last year when it began talks with the automakers about possible loans.

The Treasury also has hired two law firms and an investment banking firm to advise it on a number of options.

Obama administration officials have been talking to the automakers since they filed the restructuring plans, asking questions, but this week's sessions are the first face-to-face talks.

The Treasury Department's outside firms have been in talks on Wall Street on whether they could raise tens of billions of dollars in debtor-in-possession financing if GM or Chrysler needed to seek bankruptcy protection. An administration official emphasized that no decisions have been made and the consultants are conducting contingency planning.

The government has two options: support GM with more loans or finance a government-sponsored bankruptcy filing.

The U.S. Treasury hired Cadwalader Wickersham & Taft LLP to review different restructuring possibilities. Cadwalader is working with Sonnenschein Nath & Rosenthal, a Chicago-based law firm. They also retained Rothschild Inc., a New York investment bank.

Rather than a car czar, President Barack Obama opted to appoint a 10-person cabinet level task force and appointed 10 key staff members to assist the task force. The auto task force must also decide whether to loan billions to struggling auto suppliers.