Feds End GM/Chrysler Warranty Guarantees
In prepared testimony before the House Judiciary Subcommittee, Car
Czarlet Ron Bloom revealed that the government would no longer back GM
and Chrysler warranties. “With the successful emergence of the new
companies, consumers can now feel assured that the companies have the
financial wherewithal to meet their warranty commitments on a continuing
basis,” Bloom said. The $641 million spent by the government on the
warranty program has been returned to the Treasury with interest,
reveals Bloom. “This achievement represented a prudent short-term use of
taxpayer funds,” was his conclusion. GM spokesfolks tell Automotive News
[sub] that The General never even tapped the fund, while Chrysler reps
are mum on the subject.
Bloom also tackled the tricky subject of the dealer cull. “Consistent
with the Task Force’s role, we were not involved in the design or
implementation of New GM or New Chrysler’s dealer rationalization
plans,” he said. “We were not involved in any individual decisions about
dealers, and we do not intend to be going forward.” But, but, but . . .
the companies have engaged recently with several members of
Congress—including members of this subcommittee—about potential
additional modifications of their review and reconsideration processes
that would further increase transparency and objectivity for everyone
involved. We have been supportive of this process, in our role as a
facilitator, to ensure this process is transparent, fair and objective.
However, the Administration strongly opposes the amendment to the
Financial Services appropriations bill that attempts to restore prior
Chrysler and GM franchise agreements.
Political intervention of this nature could also jeopardize
taxpayer returns by making it far more difficult for the companies to
access private capital markets if there is ongoing uncertainty about
whether Congress will intervene to overturn judicially approved business
decisions anytime that it disagrees with the judgments of the companies.
Some strong opinions there for a “facilitator.” But Bloom clearly feels
that the stakes were high enough to justify his task force’s tough
stances. Not that there aren’t some signs that Bloom (or Obama) has some
doubts about the intervention. Bloom concludes
In a better world, the choice to intervene would not have had to be
made. But amid the worst economic crisis in three-quarters of a century,
the Administration’s decisions avoided a devastating liquidation and put
a stop to the long practice in the auto industry of kicking hard
problems down the road. The Auto Task Force worked quickly to assist GM
and Chrysler and did so in a fair and open way. While difficult for all
stakeholders involved, these transactions provide New GM and New
Chrysler with a new lease on life and a chance to succeed.
Ron Bloom Testimony (Treasury.gov) »