January 21, 2009 - Timothy Geithner at Senate Finance Committee, Washington D.C.

Treasury nominee calls for big changes in Detroit 3

The Obama administration will assemble a team of people to oversee the government’s loans to Detroit automakers, demanding “substantial changes” from all sides, the nominee for U.S. Treasury Secretary told a Senate committee today.

Timothy Geithner told the Senate Finance Committee that any aid to automakers should be “in support of a comprehensive restructuring that will leave the industry in a stronger financial position where they can be profitable and healthy without government support.”

“That’s going to require very, very substantial changes by all stakeholders,” he said.

Geithner, who’s played a key role in the bailout of financial markets as president of the New York branch of the Federal Reserve, said the Obama administration was building a team with “expertise in manufacturing, in restructuring, who understand how these labor contracts work.”

The question was spurred by Sen. Jeff Bingaman, D-N.M., who questioned how Fiat S.p.A could arrange for a large stake in Chrysler LLC without providing any cash. Under the outlines of the agreement announced Monday, Fiat will get 35% of Chrysler, with an option to boost its stake to 55%.

Chrysler was loaned $4 billion by the Treasury, and has pressed for $3 billion more, although Treasury has not said whether it will grant additional aid.

“It’s hard to explain to the American taxpayer why the taxpayer shouldn’t own Chrysler,” Bingaman said.

Original Story - Detroit Free Press