Senior government officials convened at the White House on Friday (6th March) to discuss the progress of restructuring plans for General Motors (GM) and Chrysler.

The troubled Detroit-based auto giants have been told to present their final proposals by 31st March as they seek a further $22 billion (£15.9 billion) injection, on top of the $17.4 billion received in December.

The task force meeting, which was led by Treasury Secretary Timothy Geitner, was designed to assess whether debt reduction requirements from the previous bailout have been met.

Concerns are growing for GM in particular, whose representatives met with officials in Washington on Thursday about the possibility of converting a significant portion of its debt into equity.

Gimme Credit analyst Shelly Lombard told Reuters: "We'd expect the task force to push GM into bankruptcy rather than push back the deadline if they cannot reach a settlement.

"We'd expect the government to provide a DIP (debtor-in-possession) loan backstop rather than allowing a free-fall bankruptcy that could lead to GM and supplier liquidations."

Meanwhile, GM is coming under fire in Berlin over its proposed restructuring plan involving subsidiary Opel, with the German government reluctant to provide aid at present.

Chancellor Angela Merkel is becoming increasingly frustrated as she seeks assurances that state backing would not be lost in a potential GM insolvency, while also noting that Opel is not crucial to the German economy.

In her weekly podcast, she was quoted by Reuters as saying: "We'll help if the positives for everyone outweigh the negatives. The [rescue] plan still needs to be improved and clarified."

Furthermore, a government insider has suggested that the two companies are exploiting the political pressure involved with saving Opel as major job losses are riding on its survival.

"Our impression is that Opel has not freed itself from GM's influence and that it is not being serious about becoming more autonomous as a business," the source told the Financial Times.

"Politically, Berlin will have to do something and Opel and GM know that. They are using the threat of job losses in an election year as a blackmailing device to get our support cheaply."

Opel has requested an injection of $4.15 billion but German Economics Minister Karl-Theodor zu Guttenburg has suggested that there are "many questions that need to be cleared up" and that a decision could take "weeks".

Mr Guttenburg will be visiting the US for talks on Friday and Carl-Peter Forster, President of GM Europe, has expressed his belief that the unresolved issues will be clarified.

Mr Forster spent part of last week at the Geneva Motor Show, which he used as an opportunity to pitch his company - which also includes British subsidiary Vauxhall - to potential investors.

But with GM having factories in Germany, Sweden, Spain, Belgium, Poland and the UK, there are concerns that its demands will be unreasonable and heavily influenced by its North American owners.

Peter Cooke, Head of the Centre for Automotive Management at the University of Buckingham Business School, told the Times: "They will be trying to play one country off against another. This is realpolitik."

"The way the American mother company is dealing with the issue of Europe is not acceptable. Enough is enough," added European Industry Commissioner Gunter Verheugen in an interview with the newspaper.

Reports have suggested that GM has pressed the UK government for an injection of around $624 million in order to save Vauxhall, a move not ruled out by Business Secretary Lord Mandelson.

In an interview yesterday with the BBC, he said: "Vauxhall is in terrible trouble - I've spoken three times in the last week to the President of General Motors in Europe, I've also spoken to the German Economics Minister because their plants are similarly affected and we will approach what we need to do together on this."

GM Europe, which employs around 300,000 people, lost a staggering $956 million in the fourth quarter of 2008.



Sources:

U.S. autos task force meets at White House (06/03/09)
http://www.reuters.com/article/privateEquityConsumerGoodsAndRetail/idUSN0640458420090307?sp=true

Berlin losing patience over Opel rescue (06/03/09)
http://www.ft.com/cms/s/0/6acf3e54-0a3a-11de-95ed-0000779fd2ac.html?nclick_check=1

Merkel says Opel rescue plan must be improved (07/03/09)
http://www.reuters.com/article/ousiv/idUSTRE5261BZ20090307?sp=true

GM set to give up on Europe (08/03/09)
http://business.timesonline.co.uk/tol/business/industry_sectors/engineering/article5864117.ece

UK's Mandelson: Full-Scale Bank Nationalization Not Needed Now (08/03/09)
http://money.cnn.com/news/newsfeeds/articles/djf500/200903080645DOWJONESDJONLINE000019_FORTUNE5.htm