President Obama announced Monday that struggling automotive giants General Motors and Chrysler will be given a "limited" period of time to "restructure in a way that would justify an investment of additional taxpayer dollars."
The federal government will give GM “adequate working capital” over the next 60 days to work in conjunction with the administration in developing a better recovery plan, he said. Chrysler will be given adequate capital to continue operations for 30 days while completing a merger with automaker Fiat. The president said that if Chrylser can come up with a “sound agreement that protects American taxpayers, we will consider lending up to $6 billion to help their plan succeed.” Obama also indicated that both GM and Chrylser might need to file for bankruptcy in the process of successfully restructuring, which will involve working with “creditors, unions and other stakeholders.” “While Chrysler and GM are very different companies with very different paths forward, both need a fresh start to implement the restructuring plans they develop. That may mean using our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger,” Obama said in remarks delivered at the White House. To help bolster consumer confidence during the companies’ potential bankruptcies, the president promised that the federal government will immediately begin backing their warrantees.
Sources: GM, Chrysler to get more money; CEO to resign
The fate of four GM brands
Obama progress report
The administration gave GM and Chrysler failing grades Monday for their turnaround efforts so far. The restructuring plans submitted by the two automakers do not go far enough to warrant the substantial new federal support, Obama said. But, he added, “We cannot, we must not, and we will not let our auto industry simply vanish. “This industry is, like no other, an emblem of the American spirit; a once and future symbol of America’s success.” The president also warned, however, that the automakers cannot depend on federal assistance indefinitely. “We cannot make the survival of our auto industry dependent on an unending flow of tax dollars. These companies – and this industry – must ultimately stand on their own, not as wards of the state.” GM’s restructuring began early Monday when CEO Rick Wagoner announced his resignation, which he said came at the request of the Obama administration. “On Friday I was in Washington for a meeting with Administration officials. In the course of that meeting, they requested that I ‘step aside’ as CEO of GM, and so I have,” Wagoner said in a statement posted to the GM Web site. He is being replaced by GM’s president and chief operating officer, Fritz Henderson. Kent Kresa will serve as interim chairman. “Having worked closely with Fritz for many years, I know that he is the ideal person to lead the company through the completion of our restructuring efforts. His knowledge of the global industry and the company are exceptional, and he has the intellect, energy, and support among GM’ers worldwide to succeed,” Wagoner said. Watch report on Rick Wagoner’s resignation »
GM and Chrysler have already received $17.4 billion in emergency federal assistance. Over the past year, Obama noted, the domestic auto industry has lost 400,000 jobs.