Political tensions flare in bailout


With the White House positioned to reshape the future of the auto industry, Republican Sen. Bob Corker was so concerned about the prospects for his home state of Tennessee that he delivered a personal warning to the administration’s point man on the issue.

Don’t keep plants open in Ohio and Michigan, which voted for President Obama last year, at the expense of a plant in Tennessee, which is solidly Republican, he said.

“I wanted to know: Would they employ a blue-state, red-state strategy?” Corker said in an interview, recalling his phone conversation last week with Steven Rattner, the administration’s top advisor on restructuring the domestic auto industry.


The question illustrates the new dynamic as Obama tries to balance the economic need to salvage a struggling industry that employs hundreds of thousands of people, and affects millions, against the needs of key constituencies and possibly his own reelection hopes.

Like Corker, all sides are attempting to decode messages from the White House.

The administration has sent reassuring signals to the United Auto Workers, a staunch campaign supporter of Obama, amid fears that union members and retirees will be forced to sacrifice more benefits.

By contrast, bondholders who are owed money by General Motors Corp. say they are still waiting to see whether the White House will consider their needs.

Corker would not divulge how Rattner responded to his concerns, saying only that he believed the White House would “try to do the right thing.”

But he added that politics could prove unavoidable, given the president’s ties to the UAW and his election campaign’s reliance on auto-heavy states such as Ohio, Michigan and Indiana.

“The administration owns this now,” Corker said. “They’ve taken over a private company, and in essence you can imagine the kinds of pressures on them as they move ahead.”

Rattner did not respond to requests for an interview.

A White House official, requesting anonymity because of the sensitive nature of the negotiations, said the president and his auto task force were focused on solutions that would save the industry -- not on political calculations that pale in comparison with the larger risks awaiting Obama if the auto industry were to collapse.

The official characterized the White House role as a mediator “overseeing the process and being a constant and present voice to help ask tough questions.”

During television interviews Sunday, GM’s new chief executive, Fritz Henderson, said he trusted the role Obama was playing as the company restructures -- a process that Henderson acknowledged could require some form of bankruptcy.

“He basically said we want to work together to make sure this company is viable and successful and part of the automotive industry in the next 100 years,” Henderson said on NBC’s “Meet the Press.”

“And basically he asked all the parties to come back together to make sure we do exactly that. So I don’t think it’s about hurting some constituency or another; it’s about what do we have to do to win in the future.”

But for the White House, even working with an ally such as the UAW has already proved difficult -- particularly as the administration confronts tensions among the union and GM bondholders over how much investors will lose versus how much retired auto workers will see their health benefits cut.

People close to the union said leaders were disappointed last week when Obama, addressing rescue plans for GM and Chrysler, said that any solution would “require unions and workers who have already made extraordinarily painful concessions to do more.”

The union in recent years already has agreed to a new wage structure that allows companies to hire workers for far lower pay and has agreed to give up generous benefits for laid-off workers. And union advocates already know that any rescue plan probably would include plant closings and additional layoffs.

“The workers have given enough already,” said David Bonior, a former Michigan congressman who is now a top leader in the labor movement.

Bonior added that Obama has “got to be very careful” about alienating a key political ally in the Rust Belt.

“He’s got to factor in that every one of those states gave him his victory,” he said. “You can very well lose Ohio and Indiana with not being sensitive to this. You can throw in Wisconsin and Michigan as well.”

White House officials have moved in recent days to minimize future strains on union ties by offering at least supportive words for the UAW’s arguments. An administration official said the White House was “quite aware” of the danger posed to thousands of retirees who spent their careers at GM with the expectation that they would have healthcare coverage for life.

Another person close to the UAW and familiar with its discussions with the White House said the administration was conveying its sympathies on the issue.

One top official, Obama advisor David Axelrod, sent such a signal Sunday when he said that union members had “already taken a haircut.”

“They’ve been sitting at the negotiating table and making concessions,” Axelrod told “Fox News Sunday.” “What we shouldn’t do is ask the sacrifices of the workers to be disproportionate.”

The White House, however, is not reaching out to GM bondholders, a group of large investment companies and others with billions of dollars at stake -- entities that are considered politically toxic given the public outrage at Wall Street for its role in the economic crisis.

Representatives of the bondholders, who were rebuffed by administration officials in a meeting last month, are discussing ways to soften their image -- to highlight longtime investors as well as people whose retirement funds hold GM bonds and others who viewed the company as a good investment.

One group of bondholders representing billions of dollars in debt has formed a committee and retained Glover Park Group, a Washington public relations firm with close ties to Democratic politics, though the committee has not disclosed its membership.

In an e-mail Friday through the PR firm, advisors to that committee pointed to “tens of thousands of average Americans who hold GM bonds in their pensions, savings accounts and 401(k)s.”

“We would welcome the opportunity to have real and constructive dialogue with GM and with the task force,” the e-mail said. “Giving the bondholders a seat at the table is the only way to ensure a successful restructuring.”

Administration officials say the Chrysler plan is less complicated, now that the White House has directed the company to pursue a merger with Italian automaker Fiat over the next month.

David E. Cole, chairman of the Center for Automotive Research, called the dispute between the UAW and the bondholders a “cage match” that, at the moment, was taking place with Obama standing right outside the cage waiting to step in and set the terms of a final deal or decide in favor of a bankruptcy that neither side probably wants.

“He could make everybody unhappy,” Cole said. “The real risk, though, is a failure for a company like GM, which would mean millions of jobs lost. If that happens, and it leads to a depression, then [Obama] would pay dearly for that.”