The Office of the President-Elect?

Obama Pushes for $50 Billion for Automakers, Oversight Czar

By injecting himself into the talks about how to save General Motors, Obama is making an exception to his decision to steer clear of policy-making until he takes office.

The president-elect also wants the Federal Reserve to extend emergency loans to General Motors, Ford Motor Co. and Chrysler LLC, according to Obama aides who spoke on condition of anonymity.

The failure of those companies would likely bring down parts-makers, dealerships and suppliers in addition to inflicting a deep psychological blow.

If the plan were to offer no strong guarantees against layoffs it would likely draw fire from unions. But Obama advisers have been persuaded that the impact on current workers and retirees would be staggering if the companies went into bankruptcy.

Any auto czar or committee would presumably have the job of overseeing a restructuring of the auto industry.

With the right sort of restructuring, I’d be in favor of providing guaranteed loans, much as was done with Chrysler.

Update 2:G.M.’s Troubles Stir Question of Bankruptcy vs. a Bailout

But not everyone agrees that a Chapter 11 filing by G.M. would be the disaster that many fear. Some experts note that while bankruptcy would be painful, it may be preferable to a government bailout that may only delay, at considerable cost, the wrenching but necessary steps G.M. needs to take to become a stronger, leaner company.

Although G.M.’s labor contracts would be at risk of termination in a bankruptcy, setting up a potential confrontation with its unions, the company says its pension obligations are largely financed for its 479,000 retirees and their spouses.

Shareholders have already lost much of the equity that would disappear in a bankruptcy case. Shares of G.M. rose 16 cents Wednesday, to $3.08, but they have fallen 90.5 percent over the last 12 months, amid sharply lower auto sales and fears about G.M.’s future.

And as companies in industries like airlines, steel and retailing have shown, bankruptcy can offer a fresh start with a more competitive cost structure to preserve a future for the workers who remain.

Update 1: General Motors Death Watch 212: An Open Letter to President-Elect Barack Obama

Over the last three decades, for reasons too numerous to elaborate, the majority of Americans (especially passenger car buyers) have switched their loyalties to foreign-owned brands. You will hear various explanations for this failure from the men in charge of Detroit: unfair foreign trade, currency manipulation, fuel economy regulations, health care costs, union collective bargaining agreements, the current credit crisis and more. We urge you to discard these explanations and only look at sales trends for the past three decades. Again, for whatever reasons, American consumers mostly abandoned Detroit.

By the same token, American automakers abandoned their customers, by failing to invest its profits in flexible assembly techniques, new powertrains and platforms, and better design. By failing to spread their investments in a range of vehicles to meet consumer needs, or fully embrace the fuel efficient future that Congress has dictated. To rectify this situation, urgent action is required. But you, as president-elect, must face this crisis with a clear understanding of the limitations you face.

Restructuring

Restructuring is the corporate management term for the act of partially dismantling or otherwise reorganizing a company for the purpose of making it more profitable. Also known as corporate restructuring, debt restructuring and financial restructuring.

Restructuring is often done as part of a bankruptcy or of a strategic takeover by another firm, such as a leveraged buyout by a private equity firm.