WASHINGTON, Feb 17 (Reuters) - U.S. Treasury Secretary Tim Geithner and the White House will convene the Obama administration’s task force on restructuring General Motors Corp (GM.N) and Chrysler LLC this week with the government, saying more would be required of the companies and their stakeholders.
“The president’s team will be reviewing these reports closely in the days ahead,” White House spokesman Robert Gibbs said on Tuesday. His statement came shortly after GM and Chrysler submitted restructuring plans to the Treasury Department outlining new cost cuts, business plans, and seeking a combined $22 billion in new federal assistance.
“It is clear that going forward, more will be required from everyone involved — creditors, suppliers, dealers, labor and auto executives themselves — to ensure the viability of these companies going forward,” Gibbs said from Phoenix where President Barack Obama was traveling.
The White House did not rule out a government-managed bankruptcy for the automakers.
Geithner said in a separate statement that the task force, to comprise senior White House, Treasury and other government officials, would “analyze the companies’ plans and solicit the full range of input from across the administration” on steps necessary to restructure GM and Chrysler.
He said the group which Geithner co-chairs with White House economic adviser Laurence Summers would convene for the first time later this week.
Geithner was not more specific.
House Speaker Nancy Pelosi of California said she hoped the plans would “transform the industry” and did not rule out any future action by Congress “that may be needed.” House Democratic leader Steny Hoyer of Maryland said Congress would hold the industry accountable for achieving “real reform.”
The White House and Treasury did not address the additional request for government loans by GM that would raise its total bailout from the $13.4 billion approved in December by the Bush administration to nearly $30 billion.
Chrysler, considered the weakest of the Detroit manufacturers, received $4 billion in the December rescue and sought another $3 billion. The company asked for an additional $2 billion on Tuesday.
Tuesday’s deadline for filing restructuring plans was the first step by the companies in their attempts to show the government by March 31 that they can be commercially viable and worthy of federal support.
Michigan Rep. John Dingell, a Democrat and longtime industry ally, said government “must do whatever is possible” to preserve the U.S. auto industry, which is reeling from recession, consumer credit woes, and a product mix that for many cannot measure up to more efficient foreign brands.
Dingell said GM and Chrysler each demonstrated “a clear path to viability,” with their restructuring blueprints that included planned debt reduction, labor cost cuts and plant closures.
“The cost of action will be high, but the cost of inaction will be higher,” Dingell said in a statement.
Mark Zandi, chief economist at Moody’s Economy.com, told Congress in December that restructuring the U.S. auto industry to keep GM, Chrysler and Ford Motor Co (F.N) from near-term bankruptcy would cost between $75 billion and $125 billion, depending on how sales hold up.
Ford did not seek a bailout but is struggling, as are suppliers for the entire industry. Ford favors a line of credit from the government if its finances worsen more than expected in 2009.
Rep. Thaddeus McCotter, a Michigan Republican, told Reuters that GM and Chrysler have taken “painful first steps” to restructure and have taken seriously the cost and other targets set in the December bailout terms.
“They are trying to comply with the requirements. The question will be how the new task force views it,” McCotter said.
He believes the administration will be deliberate in its approach to GM and Chrysler but all have to assume that March 31 is a hard deadline.
Some lawmakers have suggested the timetable set by the Bush administration could be extended if GM and Chrysler make meaningful progress but need more time to prove viability.
Others, however, say that keeping the deadline firm will keep pressure on the companies, labor and bondholders to reach the necessary concessions and take other steps to prevent bankruptcies.
“I do think it would be very helpful for the Obama administration to say, ‘Look, this is a line in the sand. These things have to occur,” Sen. Bob Corker of Tennessee, a Republican, told CNBC. (Reporting by Caren Bohan, Jeff Mason, Glenn Somerville, and John Crawley, Susan Cornwell; editing by Richard Chang) (firstname.lastname@example.org + 1 202 898 8340)