Congress under pressure as GM bankruptcy possible

With General Motors Corp planning to end production of Saturns and Pontiacs at its Delaware plant which employs more than 1,000 people, state leaders are scrambling to win new work at the facility or persuade the company to move other operations to the region.

This would appear on the surface to leave us in bleak circumstances, said U.S. Sen. Thomas Carper, a Democrat and former governor who helped save the 62-year-old Wilmington plant from closure in the early 1990s.

We're encouraging them not to close the plant. At some point, GM will need more capacity, Carper said in an interview with Reuters just weeks ahead of a June 1 deadline for GM to show a White House/Treasury task force overseeing industry restructuring that it can be viable without government aid.

Failure to satisfy the task force would trigger bankruptcy where GM could try to finalize concessions. It is seeking givebacks from debtholders and the United Auto Workers and wants to more than halve its network of 6,000 dealers. GM plans to cut 21,000 factory jobs.

Lawmakers deferred to the task force as smaller Chrysler spiraled into a bankruptcy court. But there has been a broader political response to GM over the past week since a second carmaker bankruptcy would compound Detroit's uncertainty and likely radiate economic anxiety beyond the industry's Midwest core.

GM A BELLWETHER

Autos has one of the heaviest economic multipliers of any U.S. industry. For every job loss in auto assembly, another nine disappear elsewhere, Mark Zandi, chief economist and co-founder of Moody's Economy.com, has told Congress.

GM employs 88,000 factory and salaried workers in the United States. It has also been a bellwether for industries like steel, plastics, warehousing, software, healthcare, trucking and makers of glossy paper for car catalogs.

Michigan State University economist Charles Ballard believes GM's reach is vast enough to affect U.S. GDP if the whole thing were to implode, which he believes is remote.

Still, the possibility of bankruptcy is rattling Washington, which has extended GM $15.4 billion since January. The Treasury likely will be on the hook for more GM financing before month's end as well as in any court restructuring.

GM's restructuring would wipe out half the current debt to taxpayers.

Lawmakers are under pressure from constituents and interest groups like labor, car dealers, and suppliers to intervene as the Obama administration reviews the GM business plan and prepares the company for a possible bankruptcy filing.

In meetings last week on Capitol Hill, GM Chief Executive Fritz Henderson fielded concerns of lawmakers from the primary auto states of Michigan, Ohio and Indiana. He also met with officials from Missouri, California, New York, Minnesota, Texas, Georgia, Illinois and Colorado.

OPTIONS DISCUSSED

Carper said he suggested to GM North American operations chief Troy Clarke that the company locate research work on batteries and other technologies to the mid-Atlantic.

Creating a business center close to Washington where key funding and other decisions on advanced technology programs will be made in coming years would make sense for Detroit, Carper said, noting that GM, Chrysler and Ford Motor Co have lost political clout as they have contracted.

Ford is restructuring but has not sought government aid.

Sen. Robert Corker, a Tennessee Republican, discussed with Henderson the fate of the Spring Hill assembly, storage and powertrain operation that employs 3,200 people in his state.

We want those plants to stay open, Corker said in an interview. We realize the company has got to be restructured and tough decisions have to be made.

Related businesses are also feeling pressure and gaining attention from Congress.

Last week, Democratic Sen. Charles Schumer pressed GM and bankrupt Delphi Corp to reach a deal for GM to buy back four of the supplier's production plants. Two of the plants are located in Schumer's home state of New York.

I will continue to do whatever is necessary to see this purchase through, Schumer said.

On Wednesday, the House of Representatives small business committee heard from suppliers, which employ 685,000. Suppliers want Congress to authorize new assistance programs and encourage banks to resume lending to the sector once restructuring is completed at GM and Chrysler.