This Task Force Will Make Detroit More Efficient?


Detroit, Mich. — The federal terms of the multi-billion-dollar General Motors and Chrysler loans, Washington officials tell us, demand a fundamental restructuring of imperiled U.S. auto companies in order to make them viable again. Rep. Thaddeus McCotter (R., Mich.), for example, says that, while bankruptcy for these companies “is not doable,” the federal “workout” now in progress is the next best thing.

To this end, the Obama administration has convened a Presidential Task Force on the Auto Industry to oversee this “out-of-court” bankruptcy. Last week, the White House announced the makeup of its task force — and it’s a long way from what bankruptcy negotiations look like.

Prof. Lynn LoPucki, a bankruptcy expert at UCLA Law School, says a typical auto bankruptcy would involve:

- Bankruptcy court
– GM management
- The United Autoworkers Union
- Bondholders
– Bank creditors
- Auto dealers

By contrast, the Presidential Task Force announced by the White House Friday will serve in lieu of a bankruptcy judge and looks like this:

– Treasury Secretary Tim Geithner
– National Economic Council Director Larry Summers
– Secretary of Transportation
– Secretary of Commerce
– Secretary of Labor
– Secretary of Energy
– Chair of the President’s Council of Economic Advisers
– Director of the Office of Management and Budget
– Environmental Protection Agency Administrator
– Director of the White House Office of Energy and Climate Change

Senior Advisor on Auto Issues at the Treasury Department
– Ron Bloom, Senior Advisor on the Auto Industry, Department of Treasury

Official Designees of the Members of the Presidential Task Force
– Diana Farrell, Deputy Director, National Economic Council
– Gene Sperling, Counselor to the Secretary of Treasury
– Jared Bernstein, Chief Economist to Vice President Biden
– Edward Montgomery, Senior Advisor, Department of Labor
– Lisa Heinzerling, Senior Climate Policy Counsel to the EPA Administrator
– Austan Goolsbee, Staff Director and Chief Economist of the Economic Recovery

Advisory Board
– Dan Utech, Senior Advisor to the Secretary of Energy
– Heather Zichal, Deputy Director, White House Office of Energy and Climate Change
– Joan DeBoer, Chief of Staff, Department of Transportation
– Rick Wade, Senior Advisor, Department of Commerce

Surveying this monstrosity, Prof. LoPucki comments that “I don’t think this task force is intended to represent anyone but the government.”

LoPucki is quick to add that the task force is perhaps less unwieldy than it looks as the “designees” will represent the “members” and likely will be the ones at the table. Still, the UCLA prof continues, “this is a highly political process. The objective seems to be to continue the existence of GM, shrinking it only moderately. The government plans to pay whatever that takes. So whenever some party balks at making concessions, the government picks up the tab.”

An example? When GM failed, due to UAW intransigence, to produce three terms sheets required by the February 17 deadline, the government’s response was to state on D-day that GM would get its $4 billion loan payment anyway.

“In this out-of-court process, majorities of creditors have no power to bind minorities by voting,” concludes LoPucki. “Any individual creditor who refuses to take a haircut doesn’t get one.”

Your tax dollars at work.


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