U.S. autos task force cannot overreach

New Opel cars are pictured on a parking place at the Opel assembly plant in Bochum February 18, 2009.

WASHINGTON/DETROIT (Reuters) - The presidential task force charged with saving the U.S. auto industry is expected to seek firm commitments on concessions but a trickier question is whether it will leave decisions on products, operations and transactions to the companies themselves.

The team led by White House and Treasury Department officials launched the unprecedented government effort on Friday with the goal of determining by March 31 if General Motors Corp (GM.N) and Chrysler LLC can be competitive in an uncertain market and worthy of up to $22 billion in new federal aid.

Douglas Bernstein, managing partner for the banking, bankruptcy and creditors' rights practice group at Plunkett Cooney in Bloomfield Hills, Michigan, said the task force should aspire to maintain short-term deadlines as a typical lender would in overseeing a distressed industry.

Lenders typically build in milestones for demonstrating progress and then decide whether to extend credit.

"If you give too much rope at the outset, the parties are less motivated because the deadline seems a longer way off," Bernstein said.

Bernstein and other experts are nonetheless skeptical of the fast-approaching overall March timetable for determining whether the companies can be commercially viable. The unstructured process -- as compared with bankruptcy -- adds to doubts that meaningful restructuring can take place outside court.

Neither company nailed down labor and bondholder concessions before submitting turnaround plans to the Treasury Department on Tuesday -- a condition of their $17.4 December bailout.

"It's a really tangled web," said Bernstein, who suggested the government restructuring effort was a "dress rehearsal" in case either or both GM and Chrysler decide to seek bankruptcy.

Elected officials in Washington, who are keeping a close eye on the task force and expect to have input, have said the companies should get more time, if they need it.

"The government does set deadlines, the government does enforce deadlines and the government does extend deadlines," said Rep. John Dingell, a Michigan Democrat and longtime auto industry ally in Congress.

President Barack Obama is expected to participate in at least some of the task force deliberations, his chief spokesman said.

Viability plans filed by GM and Chrysler included proposals to close plants, eliminate brands and, for Chrysler, seek alliances. Experts agree that for the government to make those decisions would set an uncomfortable precedent.

"The last thing you want is an outside body making decisions or engaging in oversight on that level of granularity," said Jack Williams, a bankruptcy expert at Georgia State University College of Law and American Bankruptcy Institute resident scholar.

Sen. Bob Corker, a Tennessee Republican who has been active in auto bailout and restructuring issues, says the task force risks getting bogged down if it does not set a clear, narrowly focused agenda.

"You can imagine the politics around that," Corker said, referring to expected lobbying by individual states and their representatives to avert industry downsizing that would affect their constituents. "That's a crazy notion."

"To me, it's simple -- you either get this criteria done or the ballgame is over," Corker said in an interview.

Short of a bankruptcy filing that Williams said would impose rigor on reorganization and remove outside influences, he envisions a best-case scenario in which GM and Chrysler commit to certain steps -- as recommended by the task force -- in exchange for an extended bailout.

"These companies are at significant risk. The economy is imposing discipline on this, the pushback is political."

(Editing by Matthew Lewis)