Wanted: Czar for a Crumbling Auto Empire

DETROIT December 9, 2008; David Bailey and Poornima Gupta writing for Reuters reported that the U.S. Car Czar must be ready to deal with angry creditors, fearful suppliers and an entrenched auto union and to motivate distrustful CEOs limited to a $1 salary.

Success will be measured by your unpopularity in Detroit and on Wall Street.

The $15 billion auto industry bailout being negotiated by Democratic lawmakers and the White House hinges on the nomination of a federal overseer or a board for that purpose.

Analysts say the stakes for the job are unprecedented: the U.S. economy is mired in the deepest crisis since the Great Depression and lawmakers are negotiating a rescue to avert the collapse of General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) or Chrysler CBS.UL, which could topple Ford Motor Co

The federal oversight job, analysts say, calls for someone who is familiar with the auto industry and who has the financial acumen to restructure debt-heavy balance sheets and the diplomacy to defend the interests of taxpayers.

"It requires someone who knows how to lead and someone who knows how to listen," said Harley Shaiken, a labor law professor at the University of California, Berkeley.

Shaiken suggested David Bonior, a former Michigan congressman who managed the presidential campaign of John Edwards, as someone with the skills to navigate the job.

The first challenge for the czar will be just getting automakers through 2009 and 2010, said Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan.

"Someone like a Jack Welch who understands both operational and macroeconomics may be good," Virag said of the former chief executive of General Electric Co.

The car czar will also have to deal with automakers facing the worst U.S. light vehicle sales environment in a quarter century and expectations that 2009 will be worse, he said.

"This is not going to be a quick fix," Virag said. "It's going to take time. The car czar doesn't control the economy and doesn't control the sales of vehicles."

After a hostile reception for the Detroit automakers at Congressional hearings in November, lawmakers have moved toward extending a lifeline for Detroit but under tough conditions that would be enforced by the industry's new federal overseer.

"It is an unenviable job," IHS Global Insight analyst Rebecca Lindland said. "Any time you have mixed federal regulations with the automotive industry, it has been fraught with unintended consequences."

The car czar will have to act as part enforcer to facilitate painful deals with stakeholders, including the United Auto Workers union and creditors.

At GM, for example, bondholders could be asked to take payouts as low as 30 cents to 40 cents on the dollar, while the union is nudged to take half of some $20 billion it is owed in the form of stock in a restructured company, analysts say.

"The question is, who will it be and will they have the authority to force companies to make the hard choices," said Eli Hopson, a representative of the Union of Concerned Scientists, which has urged the government to push the automakers toward better fuel efficiency.

"It's going to be an incredibly challenging job, but if he or she does not have the tools that they are going to need it is going to be impossible," Hopson said.

Robert Salomon, a professor of business at New York University, said it was important that the oversight board include experts in accounting, banking, industry operations, politics and corporate turnaround efforts.

How hard will it be for a car czar to make it all work?

"I wouldn't say we are in uncharted waters, I think it is more appropriate as unexplored highways when it comes to where we are," Shaiken said. "We have never been here before. Chrysler was a precedent, but not remotely at this scale."