January 22, 2009 at 12:17 pm

President faces tough choices on ailing automakers' future

WASHINGTON -- With 10 inaugural balls and a first spin in the new presidential limousine behind him, President Barack Obama faces a series of urgent decisions affecting the future of the domestic automakers.

He must approve new fuel efficiency rules by April 1 and decide whether to allow California and 13 other states to impose independent tailpipe emissions limits. His administration also must decide how $25 billion in low-cost retooling loans are awarded.

And when he makes those decisions over the next four years, he'll help reshape what Americans drive -- and which companies are building those vehicles. Obama this year will choose an "auto czar" or team of people to oversee the restructuring of the domestic auto industry and decide whether to lend General Motors Corp. and Chrysler LLC more government money.

GM has received $9.4 billion in aid and could get another $4 billion in February as part of the loan package approved by then-President George W. Bush. Chrysler got $4 billion and has said it will ask for another $3 billion, which will also be up to Obama.

Chrysler CEO Bob Nardelli has said the company is counting on the funds. On Tuesday, Fiat SpA reached a deal with Chrysler to acquire a 35 percent stake in the Auburn Hills automaker from its majority owner, Cerberus Capital Management LP.

GM and Chrysler must submit to Congress comprehensive restructuring plans by Feb. 17.

Gerald Meyers, a University of Michigan business professor and former American Motors Corp. executive, said Obama will have to extend the deadlines. "There's so much to be done, and the Fiat-Chrysler deal shows how complex this is," he said. "I don't see him trying to jam this through."

Former Michigan Gov. James Blanchard said higher efficiency standards, California tailpipe requirements and other issues are secondary to the companies' survival. "The first priority is to ensure the automakers are rescued because none of the regulations will make any difference if they aren't viable," he said. "He's got a huge agenda."

Obama will get help. His administration is considering a number of New York hedge fund managers, including Steven Rattner, for the job of auto czar or as part of the team of overseers. On Wednesday, Treasury Secretary-designate Tim Geithner said a team would have a variety of experience, saying members would include "people with expertise in manufacturing, in restructurings, who understand how these labor contracts work, so that we can give the president the best advice.

"Any assistance the government provides is assistance in support of a comprehensive restructuring that will leave the American automobile industry in a stronger financial position, where they can be profitable and healthy without government support going forward. That's going to require very, very substantial changes by all stakeholders in these companies."

GM spokesman Greg Martin said the company is committed to working with the administration, which will have to address fuel efficiency changes approved, but not finalized, under the Bush administration.

During the campaign, Obama said he wanted to double fuel efficiency standards within 18 years, which would mean a fleetwide average of 50 mpg by 2027. The White House Web site now says merely that Obama wants to increase fuel economy standards.

On Wednesday, Gov. Arnold Schwarzenegger prodded him to grant California and 13 other states the right to impose their own tailpipe emissions limits.

Schwarzenegger and the chairwoman of the California Air Resources Board, Mary Nichols, formally asked the president to overturn a December 2007 decision by the Environmental Protection Agency to deny California a waiver under the Clean Air Act. The waiver would have allowed the state to impose a 30 percent reduction in vehicle emissions by 2016.

"For four years, California and a growing number of farsighted states have sought to enforce a common-sense policy to reduce global-warming pollution from passenger vehicles, which are the source of 20 percent of our nation's greenhouse gas emissions," Schwarzenegger wrote. The regulations were to take effect last fall, but were delayed. Automakers argue the rules are unworkable, requiring them to meet different standards in different states.

Under federal law, it may take the EPA a few months to grant a waiver because of procedural requirements. Obama had committed during the campaign to granting California the waiver.

This all comes as Congress considers an $825 billion stimulus package with more than $3 billion for battery research and other auto programs, and incentives for governments to buy more fuel-efficient vehicles. Obama must decide whether to push for more auto funds in that package. In August, he sought $50 billion for advanced technology vehicles, but Congress approved $25 billion.

Obama's Energy Department must determine how to parcel out those loans to spur advanced technology vehicles. More than 70 automakers and suppliers have sought funds. Detroit's Big Three have collectively sought at least $18 billion, but none has received funds to date.