Obama said he recognized that with this decision, his administration is asking these companies, unions and workers to make difficult choices and "painful concessions."
"We cannot, we must not and we will not let our auto industry simply vanish," said the president. "But we also cannot continue to excuse poor decisions. And 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."
Hitting an optimistic tone, the president also said that with patience, determination and ingenuity, "'then we will look back and say that this was the moment when America's auto industry shed its old ways, marched into the future and remade itself, once more, into an engine of opportunity and prosperity."
The administration is giving these companies just weeks to develop new strategies for survival, and on Friday leaders of the president's auto task force asked General Motors' CEO Rick Wagoner to tender his resignation, which he did.
But he added, "Let me be clear: The United States government has no interest or intention of running GM."
The president struck a balance between realism about the dire state of the auto industry and optimism that with a further restructuring, the industry would rebound and launch "a new beginning for a great American industry."
Obama also said, "I am absolutely committed to working with Congress and the auto companies to meet one goal: The United States of America will lead the world in building the next generation of clean cars."
Senior administration officials said that the General Motors plan, in its current form, "is not viable and will need to be restructured substantially."
The good news for General Motors, which has already received $13.4 billion in loans, is that the Obama administration is slightly less pessimistic about its chances of surviving. Officials concluded that General Motors' game plan "is not viable as it is currently structured," but they believe the company could come up with a credible plan with more aggressive restructuring.
"They're not quite there yet," Obama said Sunday.
Wanting a fresh start, leaders of the president's auto task force told Wagoner to tender his resignation, which he agreed to do. The company needed to turn a new page, a senior administration official explained.
Obama emphasized this morning that the move was not intended as a "condemnation" of Wagoner, a 30 year veteran of General Motors, but rather "a recognition that it will take a new vision and new direction to create the GM of the future."
Another official insisted there was no quid pro quo requiring Wagoner to leave if the company wanted further government support.
In addition to Wagoner's departure, GM will start the process of replacing a majority of its board in the next few months.
General Motors now has 60 days to develop a "leaner, more conservative but in some ways more aggressive business plan," as one administration official put it. The White House wants a General Motors' plan that more aggressively tackles its debt and its underperforming dealers and brands, and is more realistic about sales.
Obama said that over this period, the White House would work closely with General Motors to develop a better business plan.