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GM, Chrysler not required to make electric cars


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GM, Chrysler not required to make electric cars

NOVEMBER 18, 2009 - 2:30 PM ET

WASHINGTON (Reuters) -- The Obama administration's preference for robust electric car production will not influence its oversight of taxpayer equity in General Motors Co. and Chrysler, an administration official said.

Ron Bloom, the head of the government task force that facilitated the restructuring of GM and Chrysler this year, said in an interview with Reuters that there is a bright line separating the two issues.

"We obviously would be very happy if Chrysler and GM were making lots and lots of high mileage cars. It's not a prerequisite. It's not an obligation," Bloom said on Tuesday.

The government, which has deferred to directors and management of both companies, wants viable automakers that can compete globally and repay their loans in a timely way.

The Obama administration has extended $30 billion and bankruptcy financing and working capital to GM, and $8.5 billion to Chrysler. Those taxpayer investments translate into a 60 percent stake in GM and a nearly 10 percent share of Chrysler.

Plans at both companies call for more fuel efficient vehicles regardless of engine technology and a variety of smaller cars.

GM has made a big side bet on the Volt electric hybrid due out next year. But Fiat-led Chrysler this month set aside its plans to develop a similar mass-market vehicle, concluding the effort did not fit with its accelerated business plan.

The decision raised eyebrows in Washington, and in the environmental and energy communities, since Chrysler secured help from the government partly on its blueprint for battery powered vehicles.

"We're completely separating policy from ownership," Bloom said in response to the Chrysler decision. "We trust that the board has carefully thought through the various options of the company and where it was and made judgments on the electric program based on that."

Bloom was adamant, however, that GM and Chrysler meet sharply higher government fuel efficiency standards set to come on line in the next few years.

President Barack Obama has said he would like to see one million electric vehicles on U.S. roads by the middle of the next decade.

Japanese automakers Toyota Motor Corp. and Honda Motor Co. lead the industry in gasoline-electric hybrids and are planning their own fully electric models.

Chrysler and GM have applied for billions in Energy Department loans to help them retool factories and make more fuel efficient vehicles.

Bloom said the task force has assumed there would be advanced technology financing for them but said the task force would leave the matter to the boards of both companies and the Energy Department.

"If Chrysler qualifies and the DOE believes it's proper, then they'll get it, Bloom said, adding that GM "would get in line" for the money just like Ford Motor Co. and other carmakers that have received loans.

Brendan Bell of the Union of Concerned Scientists said running auto companies should not be the government's job. But he said industry would be repeating the mistakes of the past if it rolls back on advance technologies.

"Every time, the companies have failed to see where the market is moving," Bell said. "It's fair to say the government does not want to get into the job of running these companies, but as an investor, you have to see whether these companies are making smart decisions."

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