White House questions viability of GM, ChryslerPosted: Updated:
(AP) - President Barack Obama said Monday thatneither General Motors nor Chrysler has proposed sweeping enoughchanges to justify further large federal bailouts, and demanded"painful concessions" from creditors, unions and others as theirprice for survival.
Obama also raised the possibility of a controlled bankruptcy tohelp either or both "restructure quickly and emerge stronger" -uttering the term that industry and union officials have warnedrepeatedly could lead to the collapse of an entire domesticindustry.
With his words, Obama underscored the extent to which thegovernment is now dictating terms to two of the country's iconiccorporations - forcing the departure of Rick Wagoner as CEO ofGeneral Motors, and bluntly warning it may pull the plug on eitheror both companies.
The Bush administration late last year approved $17 billion infederal funds to help GM and Chrysler survive. It also demandedboth companies submit restructuring plans that the Obamaadministration would review.
Even as he pronounced their effort unsatisfactory, the presidentsaid the administration will offer General Motors "adequateworking capital" over the next 60 days to produce a reorganizationplan acceptable to the administration.
He said Chrysler's situation is more perilous, and thegovernment will give the company 30 days to overcome hurdles to amerger with Fiat, the Italian automaker. If they are successful"we will consider lending up to $6 billion to help their plansucceed," he said.
Obama spoke at the White House with the Big 3 standing at yetanother crossroads. As the president noted, the industry has shedover 400,000 jobs in the past year as the recession took hold.Officials announced last week bailout funds would be made availableto companies that supply the automakers, an attempt to keep themafloat.
Obama said he is committed to the survival of an auto industry -on terms that will allow it to compete internationally.
"But we also cannot continue to excuse poor decisions," hesaid. "And we cannot make the survival of our auto industrydependent on an unending flow of tax dollars."
He also said some of the industry's progress has scarcely beennoticed. He mentioned that the North American car of the year in2008 was produced by GM.
"Let me be clear: the United States government has no interestor intention of running GM," he said.
But that was at the same time he was formally announcing thedeparture of Wagoner, whom administration officials forced intoretirement on Sunday in preparation for the president's remarks.
"This is not meant as a criticism of Mr. Wagoner, who hasdevoted his life to this company; rather it's a recognition that itwill take a new vision and new direction to create the GM of thefuture."
Other changes at GM include new directors on its board. FritzHenderson, GM's president and chief operating officer, became thenew CEO. Board member Kent Kresa, the former chairman and CEO ofdefense contractor Northrop Grumman Corp., was named interimchairman of the GM board.
"The board has recognized for some time that the company'srestructuring will likely cause a significant change in thestockholders of the company and create the need for new directorswith additional skills and experience," Kresa said in a writtenstatement.
The Obama move comes amid public outrage over bonuses paid tobusiness leaders and American International Group executives - setagainst a severely ailing economy.
GM failed to make good on promises made in exchange for $13.4billion in government loans. Chrysler, meanwhile, has survived on$4 billion in federal aid during this economic downturn and theworst decline in auto sales in 27 years. In progress reports filedwith the government in February, GM asked for $16.6 billion moreand Chrysler wanted $5 billion more.
GM owes roughly $28 billion to bondholders. Chrysler owes about$7 billion in first- and second-term debt, mainly to banks. GM owesabout $20 billion to its retiree health care trust, while Chryslerowes $10.6 billion.
GM and Chrysler employ about 140,000 workers in the U.S. InFebruary, GM said it intended to cut 47,000 jobs around the globe,or almost 20 percent of its work force, close hundreds ofdealerships and focus on four core brands - Chevrolet, Cadillac,GMC and Buick.