WASHINGTON DC – President Barack Obama last month handed his auto-industry team a seemingly impossible task: to engineer the most complicated industrial restructuring ever attempted by the federal government, and to do it fast.

With almost no experience in the car business, the team’s dozen core members have undergone a crash course in the myriad woes plaguing the U.S. auto industry. Within days, just over a month after setting to work, they’ll begin announcing decisions, The Wall Street Journal reported.

Interviews with task-force members indicate that the administration doesn’t want to let General Motors Corp. and Chrysler LLC slip into bankruptcy protection, a course advocated by some critics of the industry. Instead, the task force is expected to say that it sees viable futures for both GM and Chrysler, but only if there are sacrifices from their managements, unions and GM’s bondholders. The team will also lay out a firm timeline for action.

The government is prepared to lend the companies more money. The two companies have requested $22 billion more – including $9 billion for the second quarter. But the task force may not disburse new aid immediately, choosing instead to preserve that as leverage.

Hanging in the balance are the jobs of 140,000 GM and Chrysler employees, more than 10,000 dealerships across the country, and a large swath of the industrial base in the Midwest.

On Wednesday, the task force met with officials from Chrysler and Italy’s Fiat SpA and indicated it is still interested in seeing the two companies form an alliance, as the companies have proposed, according to two people who attended the meeting.

It’s clear the team is not yet ready to put forward a comprehensive fix. “It’s a steep learning curve that they’ve been climbing, and there is still a lot to do,” said Michigan Rep. Gary Peters, whose district in suburban Detroit houses hundreds of auto suppliers, a few days after meeting with the task force. “That’s why I suspect they’ll come out with some preliminary statements, and then get back to work.”

In session after session in a warren of offices at the Treasury Department, the team has sat through tutorials on dealer financing, studied basic data and debated the future of U.S. car sales. They have spent days trying to understand the complexities of the hundreds of companies that supply the car companies with axles, seats and other parts.

Steven Rattner, a former journalist-turned-investment banker, was picked last month to head the team. He reports to Treasury Secretary Timothy Geithner and Lawrence Summers, the chief White House economic adviser. Rattner compares the challenge to a complicated puzzle.

“It’s like a Rubik’s cube, trying to untwist it and trying to get all the colors to line up,” he said in an interview. “So we’ve learned a lot about how car dealers work, and how companies get paid when they sell a car to a dealer, and why there are a certain number of dealers more than are optimal. Have we learned everything? Of course not, but I think we are learning what we need to learn to do this job.”

The team’s industrial expertise comes from Ron Bloom, a scrappy Harvard Business School graduate who gave up investment banking in 1996 to work as a top adviser to the United Steelworkers union. When Bloom’s aging 1997 Ford Taurus conked out a few weeks ago, he traded it for a green Mustang with 50,000 miles on the clock.

Several team members, such as Brian Deese, a 31-year-old former Obama campaign aide, are on loan from the White House’s National Economic Council. Three others specialize in climate change. The rest come from agencies such as the Energy and Labor departments. Backing them up are about 30 accountants and advisers.

Rattner dismisses the idea that his team may not have enough auto expertise to tackle the job. “We are not trying to run car companies,” he says. He compares the work to what he and others have done in the private sector. “This is the type of investment decision that many of us on this team are used to making.”

Before the team got started, the federal government already had sunk $17.4 billion in loans into GM and Chrysler. (Ford Motor Co. said it didn’t need government assistance.) The two car makers received emergency cash in December on the condition they put forward plans by mid-February proving their long-term viability. When that deadline rolled around, the auto makers asked for up to $22 billion in loans and promised major changes.

Chrysler’s plan included two options: remaining a standalone company, and striking the alliance with Fiat. GM’s blueprint called for 47,000 job cuts, the elimination of brands such as Saturn, and the sale of stakes in international operations.

The team didn’t get fully up and running until the last week of February, nearly a week after the companies submitted their plans. Among its first tutors was Sean McAlinden, chief economist at the Ann Arbor-based Center for Automotive Research. “They called on a Sunday and wanted us [in Washington] the next day,” McAlinden says.

His verdict was gloomy. Americans this year will buy around 10 million new vehicles, he predicted, down from 13 million last year. And the market would never again top the 16 million units it last hit in 2007. “They just soaked it up,” says McAlinden.

The team got another dismal take from Deutsche Bank’s auto analyst, Rod Lache, who made a splash in November when he set a target price of zero for GM’s stock. His advice was to ignore the data. He recalls telling them: “This is a policy decision, not an economic one. One way or another, GM will have to be saved.”

A few days later, Virg Bernero, the mayor of Lansing, and 10 other city officials from around the country packed into a Treasury conference room with Bloom and Deese. The son of a retired GM line worker, Bernero gave a heated defense of the importance of the auto industry. “We need to make saving the industry a national initiative like the Apollo project,” he told the team. Bloom, jotting notes, reminded the mayors that he’d spent time both on Wall Street and among the unions.

The team met the next day with executives from Fiat and an adviser who was working on the Italian auto maker’s proposed alliance with Chrysler. Fiat Chief Executive Sergio Marchionne led the team through a 75-page presentation, then served as a “color commentator” as others discussed portions of the document, a person who was at the meeting says.

Bloom focused on minute aspects of the business strategy, and Rattner, on how the deal would be structured. People on the Fiat team came away thinking that the task force’s questions betrayed a limited understanding of the industry. “It’s fair to say we walked out of the meeting and were a little unsettled,” says one member of the Fiat team.

In the wake of that meeting, the executives and advisers working on the alliance were bombarded with questions from the task force. In the latest meeting about the alliance on Wednesday, the task force indicated that the two companies may need to make adjustments to the deal in order to make it more acceptable to the U.S. government, according to the two people who attended the meeting.

Late last year, Chrysler and GM had discussed the possibility of themselves merging. Those talks have been suspended. The task force has discussed the prospect of forcing the two companies back to the table if they cannot be stabilized, although that seems unlikely at the moment, according to several people involved in the talks.

The task force met with a committee representing GM’s bondholders on the same day it met with Fiat executives. GM’s bondholders hold about $27 billion in unsecured GM debt, and consequently will play a critical role in efforts to save the company. In June, GM will owe the bondholders $1 billion on convertible debt coming due.

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