SHIFTING ROLES

Auto task force to switch to owner

WASHINGTON (AP) — When it brokered the restructuring of Chrysler and General Motors, President Barack Obama’s auto task force repeatedly pledged that it would steer clear of running a car company.

But with both companies exiting bankruptcy with the federal government as a major shareholder, that promise will be put to the test as the task force shifts roles from negotiator to owner.

The government could face a number of pitfalls: It could be tempted to insert itself into the day-to-day operations or sway management if auto sales continue to slide and carmakers’ financial woes continue. Lawmakers may try to use the government’s ownership as a way to push their own interests, such as making more fuel-efficient cars. And the administration will need to sell its stake as quickly as possible.

“I take them at their word that they don’t want to run an auto company, the question is whether they will get dragged into it,” said Martin Zimmerman, a University of Michigan business professor who studies the auto industry. “There is a significant chance that will happen.”

Appointed by Obama in February, the task force includes representatives of Cabinet members and economic advisers. It is officially headed by Treasury Secretary Timothy Geithner and Lawrence Summers, the director of the National Economic Council. But much of the work was overseen by two senior advisers, Steven Rattner and Ron Bloom. Rattner stepped down last week, leaving Bloom as the leader.

Wielding power in public companies once thought unimaginable, the government panel’s efforts laid the groundwork for quick bankruptcies that helped Chrysler and GM emerge with smaller debt loads, reduced work forces and streamlined brands and dealer networks.

In the process, roughly $65 billion in government loans and aid was sunk into the two companies. Under the restructuring plans, the government now owns about 8 percent of Chrysler and 61 percent of GM.

Rattner stressed again last week that the task force plans to take a hands-off approach, saying that it wasn’t interested in “picking colors of cars.” But he noted that with such a large financial interest, the government would take a role similar to a large institutional investor.

“We have fiduciary responsibilities to the taxpayers to ensure that investment is well looked after. We will interact with GM, its management and board,” Rattner said.

Both companies face a brutal car market and numerous competitors seeking buyers in a depleted market. Auto companies are on pace to sell about 9.7 million vehicles in the U.S. this year, compared with sales of more than 16 million vehicles in 2007. If the bleak conditions persist, it could increase pressure on the government to play a more active role.

Some supporters of the auto industry expect the task force to maintain its arms-length distance, crediting it with giving the two companies new life without inserting itself too much into the way Chrysler and GM conduct their business.

“They have the job to improve the foundations for restructuring without making decisions that require expertise about how you make a car,” said Rep. Sander Levin, D-Mich. “That’s the difference. How you manage is different than how you make a car.”

But critics worry that the task force has wielded too much influence and may do so again.

The plight of hundreds of shuttered auto dealers offers a window into the pressures the administration could face. GM and Chrysler are closing nearly 3,000 dealerships, moves supported by the administration. Key lawmakers including House Majority Leader Steny Hoyer, D-Md., oppose the action, saying it evades state franchise laws and will lead to the loss of tens of thousands of jobs.

“This whole notion is that some brainiac down at the task force came up with the idea that Toyota sells a lot of cars and they have less dealers and therefore we should make GM and Chrysler look like Toyota. It’s stupid,” said Rep. Steven LaTourette, R-Ohio.

The White House said Wednesday it opposed the attempts to restore the GM and Chrysler franchise agreements.

Gerald Meyers, former chairman of American Motors Corp., said the temptation to meddle with the type of cars the companies make, where factories are located, and who runs the automakers, may be too great for the Obama administration and Congress to resist.

“It isn’t in the DNA of the government to stay out,” he said.