From the WSJ, Auto Task Force Set to Back More Loans — With Strings‏

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The government is prepared to lend the companies more money. The two companies have requested $22 billion more — including $9 billion for the second quarter. But the task force may not disburse new aid immediately, choosing instead to preserve that as leverage.

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The team’s industrial expertise comes from Ron Bloom, a scrappy Harvard Business School graduate who gave up investment banking in 1996 to work as a top adviser to the United Steelworkers union. When Mr. Bloom’s aging 1997 Ford Taurus conked out a few weeks ago, he traded it for a green Mustang with 50,000 miles on the clock.

Several team members, such as Brian Deese, a 31-year-old former Obama campaign aide, are on loan from the White House’s National Economic Council. Three others specialize in climate change. The rest come from agencies such as the Energy and Labor departments. Backing them up are about 30 accountants and advisers.

Mr. Rattner dismisses the idea that his team may not have enough auto expertise to tackle the job. "We are not trying to run car companies," he says. He compares the work to what he and others have done in the private sector. "This is the type of investment decision that many of us on this team are used to making."

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Chrysler’s plan included two options: remaining a standalone company, and striking the alliance with Fiat. GM’s blueprint called for 47,000 job cuts, the elimination of brands such as Saturn, and the sale of stakes in international operations.

The team didn’t get fully up and running until the last week of February, nearly a week after the companies submitted their plans. Among its first tutors was Sean McAlinden, chief economist at the Ann Arbor, Mich.-based Center for Automotive Research. "They called on a Sunday and wanted us [in Washington] the next day," Mr. McAlinden says.

His verdict was gloomy. Americans this year will buy around 10 million new vehicles, he predicted, down from 13 million last year. And the market would never again top the 16 million units it last hit in 2007. "They just soaked it up," says Mr. McAlinden.

The team got another dismal take from Deutsche Bank’s auto analyst, Rod Lache, who made a splash in November when he set a target price of zero for GM’s stock. His advice was to ignore the data. He recalls telling them: "This is a policy decision, not an economic one. One way or another, GM will have to be saved."

A few days later, Virg Bernero, the mayor of Lansing, Mich., and 10 other city officials from around the country packed into a Treasury conference room with Messrs. Bloom and Deese. The son of a retired GM line worker, Mr. Bernero gave a heated defense of the importance of the auto industry. "We need to make saving the industry a national initiative like the Apollo project," he told the team. Mr. Bloom, jotting notes, reminded the mayors that he’d spent time both on Wall Street and among the unions.

The team met the next day with executives from Fiat and an adviser who was working on the Italian auto maker’s proposed alliance with Chrysler. [...]

People on the Fiat team came away thinking that the task force’s questions betrayed a limited understanding of the industry. "It’s fair to say we walked out of the meeting and were a little unsettled," says one member of the Fiat team. [...]

Debt for Equity

The bondholders’ attorneys laid out the details of a plan to exchange debt for equity, which would reduce pressure on GM to repay the bondholders. As the lawyers walked through a litany of potential challenges, Messrs. Rattner and Bloom took notes, offering minimal commentary, according to people who attended the meeting.

Since then, the bondholders committee has had little contact with the task force. Its lawyers say they were surprised two weeks later when Mr. Rattner publicly criticized them for not being flexible enough.

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Several auto experts who’ve met with the panel say they’ve been struck by the group’s focus on trying to determine exactly when car sales will rebound. "They are absolutely concerned with the short-term, so it’s hard to see them grasping the medium or longer-term issues," says Daniel Roos, an automotive expert at the Massachusetts Institute of Technology, who briefed the team in Washington on March 6.

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