Automaker loans included ‘made in America’ guarantees

The Detroit News reports on a new GAO analysis that indicates that the Obama administration put conditions on the loans given to GM and Chrysler that required the companies to maintain most of their current production capacity in the United States rather than outsourcing it to other countries.

Separately, the GAO disclosed that in its credit agreements, the Treasury Department won guarantees that the companies would keep significant production in the United States.

Chrysler Group LLC must either “manufacture 40 percent of its U.S. sales volume in the United States or its U.S. production volume must be at least 90 percent of its 2008 U.S. production volume.” The 40 percent figure is roughly 5 percent below what Chrysler produced in 2008 in the United States.

A person familiar with the matter said a separate loan agreement with Canada requires Chrysler to maintain a fixed percentage of production there as part of Canada’s loans to Chrysler.

General Motors Co. agreed to “use its commercially reasonable efforts” to ensure its production is “at least 90 percent consistent of the level envisioned in GM’s business plan.”

Both of the agreements were designed to prevent a massive off-shoring of production, a former administration official said.

The GAO also criticized the Obama administration’s plan to disband the auto taskforce and shift oversight of the auto industry to the Treasury Department’s other branches. The GAO report said they were “concerned that Treasury may not have sufficient expertise to actively oversee and protect the government’s ownership interests, including determining when and how to divest these interests.”