Obama Details Plans for GM and Chrysler
President Obama today announced that both General Motors (GM) and Chrysler will be given another chance to submit viable restructuring plans. The administration recently completed its review of both companies' latest requests for federal assistance.
"Today I'm announcing that that my administration will offer each corporation a limited time to submit a new plan to restructure," he said.
He added, "What we're asking for is different. It will require hard choices by companies. It will require creditors to realize that they can't hold out for the prospect of endless government bailouts."
Obama announced that he and his staff are providing GM with 60 days to prepare a revised plan, during which the government will continue to assist the company with operating funds, up until the deadline of the plan.
"GM has made a good-faith effort to restructure over the past several months, but the plan they've put forth in its current form is not strong enough," he said.
On Friday, presidential aides met with GM chief executive officer Rick Wagoner and asked he resign from the company.
Obama noted that this request was not intended to reflect on Wagoner's work or devotion to the company. However, he said, "It's a recognition that it will take a new vision and new direction to create the General Motors of the future."
Fritz Henderson, former GM chief operating officer, will take over the helm at GM.
Regarding Chrysler, Obama said, "The situation is a bit more challenging." "Chrysler needs a partner to remain viable," said the president. He went on to note that Fiat is prepared to partner with Chrysler, though there are still hurdles to cross.
"Such a deal would require an initial investment of taxpayer dollars," he said. "That's why we'll give Chrysler and Fiat 30 days to overcome these obstacles and to reach an agreement If they're able to come to a sound agreement, we'll consider lending up to $6 billion to help them succeed."
If neither of these efforts work for either company, Obama said the next step for both of them might be "structured bankruptcy"-but warned that this wouldn't mean either company would cease existence.
"I know that when people hear the word bankruptcy, it can be unsettling," he said. " I'm not talking about a process where a company is simply broken up and sold off and no longer exists. I'm not talking about a company that's stuck in port and is unable to get out."
In addition, Obama noted that the government is working to stimulate the automotive market as much as possible, both through accelerating its own purchase of fleet vehicles and trying to open the flow of credit to both dealers and consumers.
"It will take an unprecedented effort on all our parts to see the automotive industry through these difficult times," he said. " This path has been chosen after consulting with other governments that are facing the same crisis."
The president also announced that he has appointed Edward Montgomery, former deputy labor secretary, as the new director of auto recovery.
Obama blamed the state of the automotive industry on "a failure of leadershipfrom Washington to Detroit."
He also stressed its importance to the economy at large.
"We cannot and will not simply let our auto industry simply vanish," he said. "It's a pillar of our economy "
This morning, Michigan Gov. Jennifer Grandholm spoke on the Today Show
about the automotive industry's turmoiland the effect it is having
on other related sectors, including the glass industry. (CLICK
HERE for video.)
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