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GM, Chrysler make progress

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GM, Chrysler make progress

2 administration figures say automakers turning their operations around



Two of the key administration figures that led General Motors and Chrysler through bankruptcy last year said Monday that the companies have made significant progress in turning around their operations.

Ron Bloom, senior manufacturing adviser to President Barack Obama, said the administration is pleased with the management of the two companies and is "hopeful, cautious ... not yet confident" that they'll fully recover.

Bloom talked with reporters along with U.S. Sen. Debbie Stabenow at her East Lansing office before speaking to the Michigan Manufacturers Association.

Bloom also said he hopes GM can begin selling shares of stock to the public by the end of the year.

"We're not putting a firm line in the sand; we're hopeful they'll be able to do it by the fourth quarter," Bloom said.

Meanwhile, Steven Rattner, who led the administration's automotive task force from February 2009 until last July, said both companies "are hitting all the milestones expected."

Rattner also said that saving the two automakers was money well spent -- even though GM Chairman and CEO Ed Whitacre may have stretched the truth in a commercial saying the automaker has repaid its debt.

GM used a government-funded escrow account to pay off $5.8 billion in federal loans and has been airing commercials saying, "we have repaid our government loan, in full, with interest," even though the government still holds 61% of GM's equity and $2.1 billion in preferred stock so it can be repaid later.

GM "may have slightly elasticized the reality" in the commercial, Rattner said.

But he added, "We can all parse the precise words and quibble about them, but I think, fundamentally, it's good news and should be taken that way."

Still, before last week's erratic stock market fluctuations, Rattner said GM's total value could be estimated at about $40 billion, based on the trading price of its bonds. That's about $10 billion less than the U.S. government invested.

"When we invested that money into GM, we never expected a full recovery," Rattner said.

A collapse of GM and Chrysler, Rattner said, would have thrown the Midwest into a regional recession with unemployment rates of more than 20%.

"I would argue that if the final cost of the GM bailout ends up in the same range as it stands today, our initiative should be valued as a success," Rattner said. "For around $10 billion, we would have succeeded in avoiding all of the economic and human calamities."

At GM, Rattner said Whitacre has sped up the decision-making process, cut inventory and reduced incentives and is changing the corporate culture. All of that, he said, could lead to a first-quarter profit for the company.

"I think the company has been tacitly signaling that they are going to be" profitable, Rattner said. At Chrysler, Rattner said he is encouraged by the company's $143-million operating profit during the first quarter. Rattner said again Monday that saving Chrysler was a difficult call because of Chrysler's limited product line and geographic reach.

"Nobody would have been in favor of saving Chrysler if we did not believe it could be viable," Rattner said.



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