[Marxism] Feds Push Auto Bankruptcy

[S. Artesian]

1. From today's WSJ.com  2. helluva bailout, isn't it?  From the same gov. 
really upset that Congress put pay caps on bankers in the stimulus plan  3. 
Anyone care to assess Obama's "FDR quotient" in light of this?
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Auto Maker Bankruptcy Looms
GM, Chrysler Plans Due Today; U.S. Taps Car Adviser Known for Extracting 
Concessions

By JOHN D. STOLL and MONICA LANGLEY

Troubled U.S. auto makers and union representatives dug in late Monday for 
all-night cost-cutting negotiations as the government advanced its point 
person on auto restructuring, a former investment banker with a record for 
demanding harsh concessions from manufacturers, unions and investors alike.

General Motors Corp. and Chrysler LLC are required to submit recovery plans 
to the government on Tuesday as part of their agreement to receive billions 
of dollars in federal loans. As the government's auto-industry task force 
began to take shape ahead of the deadline, President Barack Obama's 
administration appeared to be turning up the pressure on GM and Chrysler to 
carry out tough restructuring measures, possibly through the use of

The administration stepped back over the weekend from naming a "car czar," 
as it had planned, to oversee the restructuring. But according to people 
familiar with the task force, it named former Lazard Freres & Co. investment 
banker Ron Bloom a key adviser. Mr. Bloom, who made a name advising U.S. 
steelworkers to accept major concessions in several bankruptcy cases, is 
expected to take the task force's lead role, a senior U.S. Treasury official 
says.

People who know Mr. Bloom expect him to be tough on the auto makers, the 
United Auto Workers and other parties involved in their restructuring.

"The management of the Big Three are probably not going to like what Ron 
Bloom has to say; the UAW is not going to like what Ron Bloom has to say; 
and certainly the stockholders and creditors will not like what he has to 
say," said Michael Psaros, a co-founder of private-equity group KPS Capital 
Partners, who has worked with Mr. Bloom in and out of bankruptcy courts. He 
adds that Mr. Bloom has "repeatedly shown an ability to transform struggling 
companies into profitable going concerns."

Under the terms of their federal loans, GM and Chrysler are supposed to 
submit plans to the Treasury Department on Tuesday to show how they are 
using taxpayer dollars to become viable. These are supposed to include 
agreements with the UAW on labor-cost reductions and deals with bondholders 
and other creditors for reducing their debt. Those talks have bogged down as 
all sides awaited the naming of a car czar to oversee the process.

On Monday, GM's bondholder committee delivered a "framework" for a new debt 
structure, one person close to the committee said. Late Monday afternoon, 
talks between the UAW and both GM and Chrysler were also making some 
progress as the parties hammered out cost-reduction details. But people 
familiar with the talks said significant differences remain between the 
sides.

The car companies must submit their proposals by 5 p.m. Tuesday to James 
Lambright, chief investment officer for the Troubled Asset Relief Program.

The government could seek tougher concessions from the auto industry because 
conditions have worsened since the loans were offered in December. "With the 
economy in this precarious situation, no one wants to put the automakers 
into bankruptcy, but can this much restructuring be accomplished without 
bankruptcy?" said one auto adviser. Ultimately, the government will have to 
decide how much to subsidize the auto industry, he added. "That's a critical 
decision that only the president can make."

Details of the government's task force emerged over the weekend but its 
final composition remains unclear. It will be led jointly by Treasury 
Secretary Timothy Geithner and Lawrence Summers, who heads the National 
Economic Council, and will be responsible for managing the $17.4 billion in 
federal loan agreements between the auto makers and the U.S. government.

Mr. Bloom, 53 years old, was named as an adviser to the Treasury and will 
report to Messrs. Geithner and Summers. Also named to the task force was 
Diana Farrell, deputy director of the National Economic Council. Ms. Farrell 
was formerly a director with McKinsey & Co. She did not respond to requests 
for comment.

People familiar with the panel say it could also include Steven Rattner, a 
New York financial executive who was strongly considered for the car czar 
role.

White House spokesman Robert Gibbs said naming a team brings in "a broader 
array of people" who have expertise and "can deal with the many challenges" 
the industry is going to face in the next several months.

GM so far has accepted $13.4 billion in loans and Chrysler $4 billion. GM is 
expected to tell the government it needs several billion more or it may have 
to file for bankruptcy protection. Chrysler has said it hopes to get $3 
billion in additional loans.

The Obama administration has told GM to address the possibility that it will 
eventually file for bankruptcy protection, Rep. Sander Levin, a Michigan 
Democrat, said Monday.

"They've been asked to address the issue of bankruptcy in their plan but not 
to have that as an alternative plan," Mr. Levin said in a phone interview. 
"That's my understanding."

A GM spokesman declined to comment on a bankruptcy plan. People familiar 
with the matter have said the auto maker has been preparing detailed 
bankruptcy plans and has softened its previous view that such a filing was 
not an option for the company.

David Axelrod, a senior adviser to President Obama, declined to rule out 
government-backed bankruptcy. "We're going to need a major restructuring of 
these companies," he said on NBC's "Meet the Press." "How that restructuring 
comes is something that has to be determined."

Mr. Bloom, a Harvard Business School graduate who spent 10 years at 
investment banks before joining a team advising the steelworkers union, is 
seen as one of the chief architects of a consolidation of the steel industry 
that has involved about 35 bankruptcies over several decades. He's known as 
a blunt communicator. The voicemail greeting on his office and cellphone is 
simply, "Hi, it's Ron, you know the drill."

Late Monday, Mr. Bloom declined by email to comment.

In a 2006 speech at a corporate turnaround conference in Scottsdale, Ariz., 
he described his approach to restructuring as "dentist-chair bargaining," in 
which the patient "grabs the dentist by the b -- and says, 'Now let's not 
hurt each other.'"

Under Mr. Bloom's guidance, the United Steelworkers gave up pay, job 
security and benefits in a bid to help the industry recover. In some cases, 
thousands of steelworker jobs were lost when union leadership agreed to 
large-scale reductions in restructured companies. Mr. Bloom also negotiated 
benefits for union members and retirees that kicked in once reconfigured 
steel companies became profitable.

Such solutions could also come into play at the automakers. Wilbur Ross, a 
billionaire investor who worked closely with Mr. Bloom in restructuring the 
steel industry, credits him with being tough on companies without being 
destructive. He "probably saved the jobs of 100,000 steelworkers," Mr. Ross 
said, while also saying Mr. Bloom "negotiated a totally different contract 
that simplified work rules" and other union provisions.

Alan Reuther, the UAW's legislative director, said the union doesn't believe 
Mr. Bloom's appointment increases the chances that auto makers will seek 
bankruptcy protection. Mr. Reuther lauded the choice of Mr. Bloom, calling 
him a "very bright, talented person with a lot of experience about 
restructuring."

People familiar with the matter said Mr. Bloom is expected to lean heavily 
on the NEC's Ms. Farrell, as well as Centerbridge Capital's Stephen Girsky, 
a key adviser for United Auto Workers President Ron Gettelfinger.

The Obama administration decided to name a task force after concluding that 
identifying and recruiting a car czar was a nearly impossible task, say 
officials and finance executives.
"Whoever did the job would be politically assassinated," said one 
administration official.
"The car czar became a political hot potato. A smart New York guy wasn't one 
of theirs [from the Big Three]. And a Detroit guy wasn't acceptable to 
environmental and energy interests. No one person would be politically 
acceptable."

A leading contender to be the car czar was Mr. Rattner, a prominent New York 
Democrat and the founder of private-equity firm Quadrangle. Initially 
conflict-of-interest questions arose because Quadrangle had borrowed from 
Chrysler's majority owner, Cerberus Capital Management LP, an administration 
official said. That was resolved but Mr. Rattner had concerns about 
deserting his business for a politically charged assignment, an adviser 
said.

-Deborah Solomon, Kris Maher, Matthew Dolan and Jonathan Weisman contributed 
to this article.