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GM Generali

23.21
-0.27 (-1.15%)
09:47:13 - Realtime Data
Share Name Share Symbol Market Type
Generali AQEU:GM Aquis Europe Ordinary Share
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -0.27 -1.15% 23.21 23.23 23.25 23.32 23.07 23.31 67,963 09:47:13

US Role In GM Bankruptcy Raises Foreign Auto Concerns

01/06/2009 2:38pm

Dow Jones News


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The Obama administration's planned takeover of General Motors Corp. (GM) raises questions about whether the government is giving the auto maker a competitive advantage over foreign car companies.

U.S. auto makers and their congressional allies have for years accused foreign governments of giving an edge to their auto industries through subsidies, currency manipulation and trade barriers that hurt imports of U.S.-made vehicles. Now the U.S. could be exposed to the same criticism as it takes further steps to prop up GM and Detroit rival Chrysler LLC.

GM filed for Chapter 11 bankruptcy protection in New York on Monday, the largest-ever U.S. industrial bankruptcy filing. The U.S. government plans to provide $30 billion in additional financing to restructure GM. That investment in GM, on top of $19.4 billion in earlier aid, illustrates the type of support foreign auto makers said is designed to favor Detroit.

An Energy Department program to speed the development of fuel-efficient vehicles gives preference to plants at least 20 years old. And a proposal making its way through Congress to stimulate car sales through vouchers would exclude certain cars, such as leased vehicles, that are the specialty of foreign auto makers.

"It's one of those things where you begin to say, 'This is really beginning to tilt the playing field,'" said Michael Stanton, president and chief executive of the Association of International Automobile Manufacturers Inc., which represents Toyota Motor Corp. (TM), Honda Motor Co. (HMC), Nissan Motor Co. (NSANY) and others. "We understand that's going to happen to some degree. It's the amount of the degree that has us worried."

Edward Cohen, Honda's vice president for government and industry relations, said Honda supports the Obama administration's effort to sustain the domestic auto industry, but added, "At some point, it crosses a line and begins to have some competitive implications, and I think we've asked about that."

Obama administration officials have insisted their actions to prop up GM and Chrysler are necessary to save jobs and prevent further damage to a fragile economy. They said the intervention is reluctant and intended to be as brief as possible.

"We are going to play as minimal a role as we can responsibly play," an official close to the government's negotiations told reporters last week.

The prospect of the U.S. government owning 60% of GM for an indefinite period raises a host of other questions, including whether policy decisions will ultimately be influenced by the health of GM. Those decisions will cover matters such as car-emissions standards, safety regulations and compensation to GM's workers.

The Obama administration has said it would not run the daily operations of GM, and that its main role would be to appoint board members, thereby prevent politics from influencing the company. But Douglas Elliott, a fellow at the Brookings Institution, a Washington-based think tank, said politics coming into play might be inevitable.

"There are going to be a lot of decisions over time which will have differential effects on foreign auto makers and U.S. auto makers," Elliott said. "If those decisions are made in a context in which we own GM, there's going to be questions, and more than that, there's going to be actual pressure to favor the U.S. auto makers."

He said he believed the government's intentions were clearly out of necessity.

"Certainly, I think the reason we're doing it is to not particularly favor GM," Elliott said. "But, of course, that kind of logic is the same reason foreign countries have done what they've done."

Foreign car companies have largely supported the government rescue of GM and Chrysler because of the industry-wide impact a collapse would have on the fragile network of auto suppliers, which serve multiple companies.

Stanton, of AIAM, said the administration risks crossing a line when it explicitly endorses U.S. vehicles, as Obama appeared to do last month during the announcement of Chrysler's bankruptcy filing.

"We believe it is vital to retain and encourage a level playing field for all," he wrote in a letter to Obama, adding that "actions that lead to discrimination on the basis of company ownership will harm" Americans who work for international auto makers.

Stanton said foreign auto makers will continue to scrutinize the government's efforts to prop up the industry.

"We want GM to be successful," he said, "but we don't necessary want them to be successful at our expense."

-By Josh Mitchell, Dow Jones Newswires; 202-862-6637; joshua.mitchell@dowjones.com

 
 

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