Congress’ General Accounting Office has questioned the Obama administration’s ability to decide when and how to divest the federal government from Chrysler and GM. The concerns have arisen from the auto task force’s declining staff and expertise within the auto industry.
The GAO reported today that, since its formation earlier this year, the auto task force has lost eight of its twelve professional staff members
The GAO also raised concerns about the recent appointment of Ron Bloom, the head of the auto task force, as the administration’s senior counselor for manufacturing policy which will force him to divide his time between the two positions.
A final concern for the Congressional watchdog group is recent Treasury Department announcements that warned of additional reductions in the task force’s staff.
The 31-page GAO report stated, “We are concerned that Treasury may not have sufficient expertise to actively oversee and protect the government’s ownership interests, including determining when and how to divest these interests.”
Other findings included in the report which was compiled over the past three months include domestic new vehicle production requirements the administration has imposed on Chrysler and GM. Chrysler is being required to keep domestic vehicle production at or above 90% of its 2008 level or manufacture 40% of its domestic sales in the U.S. General Motors Corporation is required to use “commercially reasonable best efforts” to maintain U.S. production at or above 90% of the level set forth in its business plan.
The report cites Treasury Department officials as predicting that the federal government is likely to divest itself from GM through multiple public stock offerings, whereas it will likely sell its stake in Chrysler Group through a private sale. The officials reportedly said that other options, including liquidation of the government’s stake in both companies, will be considered if either or both automakers fail to become profitable. No timeframe for such a decision was included in the report which concluded that neither GM nor Chrysler is likely to repay the massive taxpayer investments made in the last year.
Those investments, totaling about $81.1 billion, have given the federal government a 9.85% stake in Chrysler and 60.8% ownership of General Motors.
If Chrysler’s new management partner, Fiat S.p.A. is able to meet certain preset benchmarks for fuel efficiency of the company’s vehicles, the federal government’s stake will be reduced from the current 9.85% stake down to 8%.
Ron Bloom has characterized the Obama administration as a “reluctant shareholder” in both Chrysler and GM but has said that it would be fiscally irresponsible to simply give away equity which he claims “taxpayers were rightly entitled.”
In response to the GAO report, officials with the Treasury Department said that they have ample staff to fill gaps that have been created within the auto task force. In a letter dated October 23, the task force’s risk and compliance officer, Duane Morse, said, “Treasury continues to assess and take steps to maintain the expertise required to adequately monitor and manage Treasury’s interests in Chrysler and GM.” The letter also stated that, “Treasury will continue to monitor and evaluate the performance of Chrysler and GM with a view toward determining the appropriate method and timing for divesting Treasury’s interests.”
Finally, the GAO report claims that the Obama administration has neither established a unit specifically charged with oversight of its massive investment, nor has it informed Congress of its plans to utilize financial reports provided by GM and Chrysler in monitoring their performance.
Over the past three months, GAO auditors also consulted with analysts from the automotive industry who advised that taxpayer’s interests would be better served if the Treasury Department employed staff or contractors with experience in managing and selling private company stock.