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Obama's Auto Plan Must Withstand "January Storm"

Barack Obama
CNBC.com
Barack Obama

Wondering what President Obama is planning to do to save the auto industry?

Just ask some of the people the President's advisors have been consulting.

And what they paint is the picture of a White House stepping up with more money and more involvement.

For the last month and half Obama's auto "team" has been talking with economists, former auto executives, consultants, and a slew of people intimately familiar with the problems in the auto industry. The questions have gone well beyond what to do with GM and Chrysler. That's a good thing because the issues crippling this industry involve the weakened state of the suppliers, finance companies, and most importantly, the lack of buyers.

While the Obama auto plan has not been finalized, the people I've talked with believe it will ultimately focus on three areas:

• Withstanding "January Storm"

There is a crisis brewing with auto suppliers who need the financial liquidity to fire up production lines when the auto makers come off of their extended shut downs in January. Traditionally, the suppliers have borrowed against their receivables. But those receivables are a fraction of what they usually due to the down market and with the tight credit markets suppliers are facing a liquidity pinch. The Obama plan will make sure the supplier base does not collapse.

• GM and Chrysler

They are front and center with "viability progress" deadlines coming up on February 17th and March 31st. The people we've talked with say the Obama plan will ultimately have to offer these companies more money than the $17 Billion already earmarked for them. Will their deadlines get pushed back? Maybe a little, but everyone tells me the same thing: the President's people don't want GM and Chrysler to just limp along.

• Long-term plan to re-liquify the industry

President Obama doesn't want a "welfare" auto industry. He wants the auto makers, suppliers, and finance companies to thrive on their own. Yes, getting there will require restructuring many of these firms, and encouraging private equity to step up and invest in these companies.

When will we hear about the President's plan?

That's unclear, but my sense from talking with many people is the President won't wait long. My gut says we'll see some action on this by early February.

Will there be an "Auto Czar?"

Most likely, but he/she is less important than the "auto board" he turns to for help in how to push/prod the industry to change.

What about stimulating demand?

It is critical to getting this industry off its knees. Sales have to grow to 12 million if things are gonna improve.

If they stay at a pace of 10 million, the Presidents auto plan will stall.

    • Toyota: No Plans for Involuntary US Job Cuts

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