An official with the U.S. Treasury Department's task force responsible for overhauling the American automobile industry has defended the $80 billion bailout effort to rescue General Motors and Chrysler, saying it helped prevent huge job losses. The testimony came at a Senate hearing Wednesday.
"The steps the president has taken have not only helped stabilize the auto industry and saved hundreds of thousands of jobs, but for the first time in decades, they have also given GM and Chrysler a chance to become viable, competitive American businesses with bright futures," said Ron Bloom, a top official on the automobile task force.
General Motors filed for bankruptcy protection on June 1. GM officials say they hope the company will emerge from bankruptcy within three months.
The Italian automaker Fiat completed a deal Wednesday to become the new owner of Chrysler, which filed for bankruptcy in late April.
The U.S. Treasury holds an eight percent stake in Chrysler and will hold a 60 percent stake in GM after it emerges from bankruptcy.
Bloom faced tough questions from both Democrats and Republicans, who called for the government's intervention to end as soon as possible.
"The administration believes that this structure avoids the imposition of further debt on these companies. But it also begs the question: how will the government extricate itself from such a commitment in the future?," said Senator Chris Dodd, a Connecticut Democrat and committee chairman.
"We have been assured that the administration will stay out of day-to-day management, and that it will not allow politics to influence the decision-making process within the companies. On the one hand, that is very reassuring. On the other, it illustrates the inherent difficulty proposed by large government interventions in private markets. If the government intends to be a silent partner of sorts, how do they intend to protect the interests of the American taxpayer as a shareholder? I'm not sure you can have it both ways," said Senator Richard Shelby of Alabama, the panel's top Republican.
Bloom told lawmakers the administration wants to remove itself from ownership in GM and Chrysler as soon as practical. He said the government does not plan to spend any more in the bailouts of the automakers, and said there is a chance that taxpayers could get their money back.
"The best I can give you is that we have certainly looked at scenarios where over time, a very substantial and potentially all of the taxpayer investment in General Motors will be returned, but I by certainly no means would say that I am highly confident that that would occur," he said.
Many senators expressed concern about the closure of automobile dealerships across the country, resulting in thousands of lost jobs. Bloom said the administration played no role in deciding which dealerships would close.