General Motors Corp., hammered by the worst auto market in 25 years, needs U.S. aid because ``time is very short'' to stop its collapse, says Roger Altman, the former Treasury official advising GM in merger talks with Chrysler LLC.
With the government offering a $700 billion rescue for banks, it should have enough to assist GM, Chrysler and Ford Motor Co., Altman, 62, said in an interview. Altman, now chief executive officer of Evercore Partners Inc., helped with the 1979 Chrysler bailout plan as an assistant Treasury secretary.
``The consequences of a collapse by GM or all three would be very severe,'' he said. ``The impact would be widespread,'' with jobs lost by the companies and their suppliers.
The completion of yesterday's U.S. elections gives GM and other automakers a chance to renew their case for aid with President-elect Barack Obama, who said last week that helping the industry would be a top priority.
One or more automaker failures ``would be a difficult way for a brand-new administration'' to take office, said Altman, an Obama supporter whose Treasury Department service also included working as deputy secretary under President Bill Clinton.
GM fell 16 cents, or 2.8 percent, to $5.56 at 4:01 p.m. in New York Stock Exchange composite trading, while Ford dropped 7 cents, or 3.2 percent, to $2.09.
Altman has been leading the Evercore team advising GM. Two people familiar with the matter say the group includes William Repko, co-chief of Evercore's restructuring unit, and Daniel Celentano, a former Bear Stearns Cos. banker who has done work for GM. Morgan Stanley is also representing the biggest U.S. automaker.
Merger Discussions
GM, Chrysler and Chrysler owner Cerberus Capital Management LP aren't commenting on the merger talks, which come with U.S. auto sales slumping last month to the worst since 1983 and Detroit-based GM posting almost $70 billion in losses since the end of 2004. A JPMorgan Chase & Co. team led by James B. Lee Jr. is advising Chrysler, the third-largest U.S. automaker.
GM sought about $10 billion from the government last month, with Chief Executive Officer Rick Wagoner lobbying in person for help, people familiar with the plans said.
Treasury Secretary Henry Paulson wants any assistance to come from a $25 billion low-interest loan program through the Energy Department, not the bank-rescue funds, the people said last week.
Conditions on Aid?
Altman declined to say what strings ought to be attached to any aid, though he said such conditions were ``appropriate.''
``That's a decision policy makers will have to make, but time is very short,'' he said. He wouldn't say how much time GM had to avoid a collapse and said he wasn't authorized to disclose how much money GM needs.
Former Treasury Secretary John Snow, now chairman of Cerberus, joined the call for federal help for automakers today, telling CNBC that the government needs to ensure ``that a vital industry like autos, which is such a big part of the overall economy, doesn't lead us into a deeper and harsher downturn.''
A collapse of three U.S. automakers in 2009 would cost almost 3 million jobs in the first year and reduce personal income by $150.7 billion, according to a study released today by the Center for Automotive Research in Ann Arbor, Michigan.
The study takes the worst-case scenario of a shutdown of U.S. automotive production.
Obama Promise
Federal loan guarantees might help stabilize the U.S. automakers, Obama said in an interview last week on NBC's ``Nightly News With Brian Williams.''
Obama said he would meet with the chiefs of GM, Ford, Auburn Hills, Michigan-based Chrysler and the UAW to develop a plan for an industry overhaul, according to a transcript released by NBC.
``GM welcomes President-elect Obama's pledge to support our nation's domestic auto industry,'' the automaker said today in a statement. ``This support comes at an especially critical time as our industry confronts one of the most difficult economic periods in our nation's history.''
The UAW is seeking an additional $25 billion in loans for the automakers for health-care costs and Treasury or Federal Reserve aid for ``immediate liquidity,'' Alan Reuther, the union's legislative director, said today in an interview.
Evercore and GM
Altman, who said he doesn't expect to be asked to be Treasury secretary in an Obama administration, brings a career in government and Wall Street to his GM role. Evercore began to work with GM before the 2006 sale of a 51 percent stake in auto lender GMAC LLC to a group led by New York-based Cerberus, Altman said. The firm advised GM directors on the sale.
Last year, bankers from the firm advised on deals valued at $48.9 billion, including helping First Data Corp. on its $26 billion sale to Kohlberg Kravis Roberts & Co. Evercore was the 23rd-largest adviser on U.S. transactions in 2007, according to Bloomberg data.
``With Roger's experience and contacts he's well positioned'' to assist GM, Robert S. Miller Jr., chairman of former GM parts unit Delphi Corp, said in an interview. ``His public-policy background and the implications of a bailout would be most relevant in an appeal for government support.''
Should automakers falter, the factory closings and loss of jobs ``would inflict a new round of damage on the financial system,'' Altman said.
``If we can commit $700 billion to banks and insurers, we ought to be able to commit a small fraction of that to the auto industry, which affects workers directly,'' Altman said.
