TRAVERSE CITY, MI – Car czar Ron Bloom says the President’s Task Force on the Auto Industry does not intend to bail out struggling parts producers, because the thinning of the supply base must be allowed to run its natural course.
“We’re not going to try to stop the rationalization, because preserving capacity above the demand does nobody any favors,” Bloom says in a question-and-answer session after his speech Wednesday at the Center for Automotive Research’s Management Briefing Seminars here.
Downsizing of the supply base “needs to happen,” says Bloom, senior advisor to the U.S. Secretary of the Treasury and head of the auto task force. “It would be better if it happened in an orderly way, in a way that did not involve shutdowns of car manufacturing.
“But the government will not get in and decide which steering-wheel manufacturer ought to be the winner or exactly how many steering wheels (Co.) and (Group LLC) and (Motor Co.) and Toyota (Motor Corp.), etc., need. We’re going to monitor, but we’re not going to manage it.”
Bloom says he doesn’t know specifically how much contraction is necessary within the supply base. “But I think in the end, supply and demand tend to eventually meet.
“Unfortunately, I don’t see an alternative but to have capacity taken out of the supply base the same way it was taken out of the OEMs,” he says, adding the task force fully understands the interrelationships between auto makers and parts producers.
“We are deeply mindful of the importance of the supply base. You can’t make cars without steering wheels, but you don’t need steering wheels unless you have cars. We intend to be very careful and monitor closely what’s happening with the supply base.”
Bloom considers the government’s steps to usher GM andthrough rapid bankruptcies this summer as an indirect method of shoring up suppliers to those auto makers.
“If you have a healthy OE, you don’t necessarily have a healthy supply base, but you have the necessary condition (to become healthy),” he says. “I think we put the necessary conditions in place. I think we set the table for a revitalization of the supply base as well.”
Even though credit remains tight, Bloom says he is hopeful bankrupt suppliers such asCorp. and Corp. can reform their business models.
“After four years (in bankruptcy),is going to – God bless it – finally be reorganized,” he says. “Delphi couldn’t have hoped to get out of bankruptcy until it saw a future for GM.”
Bloom says the U.S. government will sell its stake in GM “as soon as is practicable.”
“GM will not be an instrument of social policy for the U.S. government,” he says. “We are a passionate investor. We want to get our money back.”
With regard to Chrysler, Bloom says the auto maker “is on the path to viability. There’s a lot of wood to chop at Chrysler, as there is at GM, but we believe Chrysler can make it.
“We have no intention of any further engagement in terms of providing capital in either of these two companies.”