Gov. Pawlenty slams GM, Chrysler bailouts

David Shepardson / Detroit News Washington Bureau

Washington -- Minnesota Gov. Tim Pawlenty criticized the decision to use the $700 billion rescue fund to restructure two domestic automakers.

Pawlenty told a group of reporters today at a breakfast sponsored by the Christian Science Monitor that the Obama administration was wrong to swap billions of dollars in loans for equity stakes in General Motors Co. and Chrysler Group LLC.

"I strongly opposed the government taking over the auto companies," said Pawlenty, who said he will decide whether to run for president early next year.

The Treasury owns 61 percent of GM, 56.3 percent of auto finance firm Ally Financial Inc. and a 10 percent stake in Chrysler.

Pawlenty called the use of the $700 billion Troubled Asset Relief Program to rescue automakers "misguided as a matter of public policy and philosophy."

The program -- initially set up to rescue banks -- suffered from "mission creep" when it was expanded to automakers and AIG, he said.

Pawlenty said a traditional bankruptcy -- without government involvement -- was the better course of action. But automakers and policymakers have argued that GM and Chrysler were unlikely to be able to quickly raise enough capital from the private sector to reorganize in bankruptcy.

General Motors Co. spokesman Greg Martin said today that the company was focused on repaying the taxpayers.

"The best way to ensure the taxpayers are repaid is for General Motors to succeed. Treating GM like a political punching bag hurts our ability to compete and hurts the thousands of families who depend on a successful GM and, ultimately the American taxpayer," Martin said.

President George W. Bush in December 2008 reluctantly agreed to a $17.4 billion bailout of GM and Chrysler. In early 2009, President Barack Obama loaned $45 billion to the companies, put them through government-sponsored bankruptcy proceedings.

"Under ordinary economic circumstances, I would say this is the price that failed companies must pay, and I would not favor intervening to prevent the automakers from going out of business," Bush said in 2008. "But these are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action."

Obama plans to visit three U.S. auto plants starting Friday, including two in Detroit, to tout his decision to rescue GM and Chrysler -- and the hundreds of thousands of jobs that were saved with the companies.

Pawlenty also criticized GM's TV advertisements that touted the company's repayment of the $6.7 billion in loans portion of its $50 billion bailout as "dramatically misleading."

"What they don't tell you is the loans have been paid back from escrow accounts that were funded with federal dollars," Pawlenty said. "They also don't tell you that they didn't buy back the stock that we purchased."

dshepardson@detnews.com (202) 662-8735