Fallout: The Financial Crisis

Panel to steer weakened auto industry

John Dimsdale Feb 16, 2009
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Fallout: The Financial Crisis

Panel to steer weakened auto industry

John Dimsdale Feb 16, 2009
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TEXT OF STORY

Tess Vigeland: California, of course, has quite a bit of company when it comes to budget woes. Today Kansas suspended income tax refunds, and it warned state employees that they may not get paid on time this Friday.

So far there’s no talk of Michigan sliding into bankruptcy. But the state’s main industry is back on the brink. Tomorrow’s the deadline for General Motors and Chrysler to submit restructuring plans to Congress and the White House. Today President Barack Obama said instead of a so-called “car czar” a Task Force on Autos will be appointed to deal with the industry’s troubles. It’ll be co-chaired by Treasury Secretary Timothy Geithner and chief economic adviser Lawrence Summers. Why the switch?

John Dimsdale reports from Washington.


John Dimsdale: The Obama administration decided the problem was bigger than a single car czar, since the crisis in the auto industry ripples across all sorts of industrial, labor and environmental policies. So one day before GM and Chrysler are to submit their restructuring plans to the Treasury Department, the White House unveiled an inter-agency task force. University of San Francisco Management Professor Jon Fisher agrees a task force will be more effective. But he worries about the implementation.

Jon Fisher: I think the fact they switched gears so close to the deadline is again an indication they don’t quite have their story straight.

To see their way out of a downward spiral, Fisher says the companies will have to squeeze more concessions from all sorts of stakeholders — parts suppliers, workers, bondholders. And so far, that hasn’t happened says Peter Cohan, the author of a book on Boeing’s restructuring.

Peter Cohan: There’s a lot of unprofitable product lines, excessive dealerships, excessive factory capacity relative to the amount of demand.

White House aides have begun to raise the possibility that bankruptcy is the only viable way to make such drastic cuts. But Republican Congressman Thaddeus McCotter says that would be disastrous for his constituents in southeast Michigan.

Thaddeus McCotter: We have always had the position here in the Midwest that bankruptcy was not an option. Not only for the long term survival of the companies, but more importantly for the retirees and the working people that are still employed in it.

McCotter expects the companies and their unions will make the sacrifices necessary to avoid bankruptcy.

In Washington I’m John Dimsdale for Marketplace.

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