March 21, 2009 at 1:07 am

Carmakers may need more aid, feds say

Rattner signals more help possible; talks with GM bondholders stall.

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General Motors Corp. and Chrysler LLC may need "considerably more" aid than the $21.6 billion they are seeking, the U.S. Treasury Department's chief auto adviser said Friday, and signaled that the government might pump more money into the ailing U.S. auto industry.

Steven Rattner's comments came a day after the Treasury Department announced a $5 billion plan to help parts suppliers.

"What they've asked for depends on them achieving plans that are somewhat ambitious," Rattner said of GM and Chrysler in an interview with Bloomberg Television. "We haven't finished analyzing, and I'm not here to pronounce on them. But like all management teams, they tend to take a reasonably -- slightly perhaps -- optimistic view of their business. So it could be more. I can't rule that out. And I don't know when the taxpayers will get it back."

Last month, the automakers made public pleas for more money, saying the $17.4 billion they have received won't keep them afloat beyond the spring.

Rattner seemed to suggest Friday that the question for the government's auto task force was not whether to further help the automakers, but how.

"The supplier money is coming from the TARP allocation, and then the administration will have to decide as we go forward where the rest would come from," said Rattner, referring to the $700 billion Troubled Asset Relief Program established to aid banks.

Rattner's indication that more aid might be forthcoming eliminates some anxiety ahead of a March 31 deadline for GM and Chrysler to show progress toward extracting concessions from the United Auto Workers and lenders.

Talks with bondholders, however, have stalled over how big a loss lenders must accept to help GM eliminate billions in debt.

A source familiar with the talks said there has been little to no conversation between bondholders and the White House task force in recent days, even as Rattner publicly suggested lenders were obstructing GM's restructuring.

Bondholders renewed complaints Friday that they are being asked to take a two-thirds loss on their holdings, while the union would lose only half what was originally owed in payments to a retiree health care fund.

"There needs to be some level of shared sacrifice from all of the stakeholders," an ad hoc committee of GM's bondholders said in a statement. "That's the only way the government is going to get the high level of acceptance from bondholders necessary to achieve an out-of-court exchange. ... We would be willing to work around the clock ... so we can work toward a solution."

While the committee negotiating with GM has not identified all of its members, major bondholders include mutual-fund companies such as Franklin Templeton Investments and Fidelity Investment. PIMCO, an investment firm for big retirement and investment programs, is also a major GM bondholder, though it is not a part of the committee negotiating with GM.

Rattner said he is likely to set a deadline for bondholders to decide whether to make concessions the automakers need to be viable.

While the bondholder talks are bogged down, Rattner indicated GM and Chrysler may get more aid.

The administration may return to Congress to seek more money, though Rattner acknowledged it may be difficult to win support for additional aid.

He also cast doubt on whether Chrysler could survive on its own and said the task force is closely reviewing the Auburn Hills automaker's request for a tie-up with Italy's Fiat SpA.

"If you read their numbers ... they are ... just kind of barely making it. You know, they just kind of inch along. There's no real uptick," Rattner said.

"So we have not made a determination on whether they can exist on a stand-alone basis, but we do find their idea of a partnership with Fiat a worthy idea to consider."

Also Friday, a bipartisan group of U.S. senators urged Treasury Secretary Timothy Geithner and Federal Reserve Board Chairman Ben Bernanke to ease the requirements in a new program that could boost auto sales.

The eight lawmakers -- including Sens. Debbie Stabenow, D-Lansing, and Carl Levin, D-Detroit -- sent letters late Thursday urging the two to allow auto dealers to take part in the program that is now open only to assets with the highest-rated investment grade ratings. That requirement effectively excludes financing of wholesale dealer inventories by auto finance companies such as GMAC LLC, Chrysler Financial LLC and Ford Motor Credit.

The letter warned that if the finance companies were shut out they would be at a cost disadvantage to their rivals and may not be able to offer competitive low-rate vehicle financing. They also noted that dealers will be charged higher rates.

You can reach Robert Snell at (313) 222-2028 or">