- The Washington Times - Thursday, June 11, 2009

Senators asked a few demanding questions Wednesday about whether taxpayers will recover the $80 billion the Obama administration is investing in Chrysler and General Motors, but mostly they wanted to know why the companies are closing dealerships.

In a hearing before the Senate Banking, Housing and Urban Affairs Committee, officials on the White House auto task force stressed repeatedly that the administration did not participate in decisions about closing specific dealers and plants, but only insisted that the companies take the steps necessary to pare their operations and become viable businesses again.

Presidential adviser Ron Bloom acknowledged that it would be difficult for taxpayers to get all their money back. GM would have to achieve an unprecedented market valuation of $70 billion for taxpayers to break even with their $50 billion investment in the company, once the company starts issuing stock again sometime next year, he conceded.

But getting a return on the 60 percent share of GM that taxpayers will own after the automaker emerges from bankruptcy will be easier after GM is shorn of its overwhelming debts, he said.

Mr. Bloom did not try to hide the White House’s elation over the quick victories it has secured in the courts for the sweeping reorganization plans and first government-sponsored bankruptcies, which have raised legal questions centered on the White House’s strong-arming of investors who loaned the automakers money.

He noted that in the Chrysler case, every venue from the Manhattan, N.Y., bankruptcy court to the U.S. Supreme Court refrained from intervening and followed the government’s recommendations, allowing a new company to emerge from bankruptcy in a record 41 days.

The fear that one or both companies would have failed and been forced into liquidation without government assistance seemed to help move the process along, he added.

“An imminent hanging tends to focus the mind. That’s what we had with Chrysler, and it seemed to work,” he said.

Committee Republicans demanded to know why the reorganization plans favored the United Auto Workers union over the companies’ lenders, who received only pennies on the dollar. But Mr. Bloom insisted the lenders received more than they would have if the companies had been liquidated under the usual bankruptcy procedures.

And he said the unionized workers made significant concessions amounting to $7 an hour primarily by foregoing cost-of-living pay increases for a couple of years.

Insisting that the White House’s decisions were “commercial” rather than “political,” Mr. Bloom said the workers and suppliers got better deals because the companies will need their cooperation to stay in business after bankruptcy.

The concessions wrung from the unions were far greater than those demanded by Senate Republicans who helped draft an auto bailout bill last year that never passed because of a Republican filibuster, he said.

“That was appropriate, because the market got worse, sales got worse” this year, he said. “In light of that, we insisted that everybody give more, and that includes the UAW and the bondholders - all key stakeholders.”

Trying to satisfy all the demands of dealers, lenders and crash victims would have cost more taxpayer money, he added. “We don’t have an alternative other than to write an endless check.”