- The Washington Times - Sunday, February 15, 2009

UPDATED:

President Obama’s senior adviser said Sunday that any plan to shore up the auto industry will need to require sacrifice by all involved, from auto workers and industry executives to shareholders and creditors.

His statement came just before negotiations about such concessions were set to resume Sunday between General Motors Corp. and the United Auto Workers, according to a person briefed on the talks. Bargaining broke off Friday night in a dispute over payments into a union-run trust fund that will take on retiree health care costs next year.

GM and Chrysler LLC are expected to submit plans to the government by a Tuesday deadline to show how they can repay billions in loans and become viable in spite of a drop in auto sales not seen for a generation.

“We need an auto industry in this country. There are millions of lives, livelihoods that depend on it,” White House adviser David Axelrod said on “Meet the Press” on NBC. “We have a real interest in seeing the auto industry survive, but it’s going to require a major restructuring of the auto industry.”

UAW negotiators walked away from the bargaining table on Friday night during talks about the retiree health-care plan. Chrysler’s talks were moving very slowly, and the UAW shifted its efforts to Ford Motor Co., the healthiest of the Detroit Three and the only one not receiving government loans.

Under the GM and Chrysler loan terms, both companies have “targets” to reduce debt and labor costs. One target says the automakers need to convert half of their payments into the trust funds in stock rather than cash, reducing their debt.

But people briefed on talks involving both companies say that’s where the negotiations became snagged. None of the people wanted to be identified because the talks are private.

On the Sunday talk show, Mr. Axelrod didn’t respond directly when asked whether the U.S. economy could withstand a bankruptcy at GM, nor did he directly address a question about whether the Obama administration would let GM go into bankruptcy, at least at this point.

“I’m not going to prejudge anything. I think that there is going to have to be a restructuring of those companies. I’m not going to get into the mode of how that happens. We’ll wait and see what they have to say on Tuesday,” he told “Fox News Sunday,” on which he also appeared Sunday.

Executives at the two automakers have said bankruptcy would not benefit their companies because consumers would be reluctant to buy cars from an automaker that might go out of business.

“How that restructuring comes is something that has to be determined,” Mr. Axelrod said. “But it’s going to be something that’s going to require sacrifice not just from the autoworkers but also from creditors, from shareholders and the executives who run the company. And everyone’s going to have to get together here to build companies that can compete in the future.”

Mr. Axelrod wouldn’t say whether the administration would offer the auto industry more bailout money. GM already has borrowed $9.4 billion to stay in business, and it would receive an addition $4 billion if the Treasury Department approves its viability plan. Chrysler wants $3 billion more on top of the $4 billion it has already borrowed.

“We need to see what it is that they come up with this week,” Mr. Axelrod said.

In Detroit, GM and Chrysler have been discussing concessions with the United Auto Workers. Talks with GM broke off Friday night over the issue of health care for retirees.

“This is a difficult situation,” Mr. Axelrod said. “Everyone’s going to have to continue to work toward a solution.”

Associated Press writer Tom Krisher reported from Detroit.

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