U.S. vows to be passive investor in GM, Chrysler

DETROIT (Reuters) - The U.S. Treasury will not step in to influence management decisions at General Motors Co GM.UL and Chrysler LLC after providing the automakers with some $70 billion in financing to restructure in bankruptcy, a White House adviser said on Monday.

"The Obama administration is a reluctant shareholder in New General Motors as well as New Chrysler," Ron Bloom, the senior adviser to the White House-appointed auto task force, told a congressional oversight panel meeting in Detroit in prepared remarks.

Bloom said the emergency government assistance had prevented a liquidation in bankruptcy for two of the three U.S. automakers, but added that "in a better world, the choice to intervene would not have had to be made."

Bloom said the success of the Obama administration's efforts to save GM and Chrysler will be judged now on how fully and quickly taxpayer funding is repaid.

An initial public offering of stock in the restructured GM could come as soon as 2010 and include some combination of new shares and the sale of government-held stock, Bloom said.

"The taxpayers put a lot of money up, and they want their money back," he said.

Bloom was answering questions from a panel appointed in 2008 to review the use of $700 billion earmarked to stabilize financial markets under the Troubled Asset Relief Program.

The panel, which is headed by Harvard Law School professor Elizabeth Warren, convened on Monday to hear from officials, executives and other experts on the auto industry bailout.

The U.S. government backed a swift sale of the best assets of GM and Chrysler to new companies through the bankruptcy process and holds a majority stake in the new GM. Chrysler is owned by a group led by Italy's Fiat SpA (FIA.MI).

GM and Chrysler both received emergency loans before and during the bankruptcy process, and both seek more loans under a separate Department of Energy program that supports converting factories to build more fuel-efficient vehicles.

GM EXPECTS LOAN CONSIDERATION

The program requires loan recipients to be "viable" and GM and Chrysler had not qualified previously.

"We would expect that with us being a viable company now that those will be looked at," GM Treasurer Walter Borst told the panel of the Energy Department loan application.

Chrysler Treasurer Jan Bertsch told the panel the automaker applied for Energy Department loans a year ago "and expect that we will be borrowing under that as outlined in our plan."

Congressional and other auto industry sources believe the Energy Department will act soon on GM and Chrysler requests for technology loans now that they have completed their bankruptcy restructurings and are considered viable.

GM has sought financing for three projects totaling roughly $10.5 billion. GM has not detailed its application but it is investing heavily in the electric Volt. Chrysler's application includes $448 million for all-electric and hybrid vehicles.

The Obama administration is also expected to announce $2 billion in grant money for automotive battery research soon. Automakers will share in those awards, officials said.

Ford Motor Co (F.N), which avoided seeking emergency U.S. government loans that propped up GM and Chrysler, was awarded up to $5.9 billion of loans through 2011 under the program.

Ford, the No. 2 U.S. automaker, has said it has the liquidity it needs to complete a turnaround on its own.

Rep. Jeb Hensarling, a Texas Republican who sits on the TARP oversight panel, pressed Bloom on whether the support for Chrysler and GM had put Ford at a competitive disadvantage.

"I'm wondering if the federal government might contribute to the economic demise of Ford," Hensarling said.

Bloom said he could not answer how and whether the administration might respond to a future request for aid from Ford if that were to happen.

"I don't have a crystal ball," Bloom said. "The facts and circumstances at the time would determine how a request from Ford would be evaluated."

Bloom said U.S. officials would take a hands-off approach on decisions GM and Chrysler make on their turnaround plans.

Now that GM and Chrysler have selected new board members, the U.S. Treasury will not have any involvement until those just-appointed slates of directors are up for election next year, Bloom said.

"That will be the full extent of it," he said in response to a question from Warren.

Chrysler's new board of directors meets this week for the first time since it emerged from bankruptcy in June.

(Additional reporting by David Bailey in Detroit and John Crawley in Washington, editing by Matthew Lewis)