GM's Rick Wagoner Gone, but Carmaker's Problems Remain

Obama said that over this period, the White House would work closely with General Motors to develop a better business plan.

"They must ask themselves: Have they consolidated enough unprofitable brands? Have they cleaned up their balance sheets or are they still saddled with so much debt that they can't make future investments? And above all, have they created a credible model for how to not only survive but succeed in this competitive global market?" Obama asked.

"We are very confident that General Motors can survive and thrive as a company," a senior official said. "We believe it has many, many assets, including its global brand. Its R&D has made a lot of progress" in making cars "more attuned to the marketplace."

Message for Chrysler More Discouraging

The Obama administration's message for Chrysler is more discouraging. It's essentially merge or die, and you have 30 days to come up with a plan.

The president said that the White House auto task force determined that Chrysler must seek a partner in order to stay viable.

An administration official said the White House believes that Chrysler's plan is "not likely to lead to viability on a stand-alone basis" and assailed "the inferior quality of its existing product portfolio" and over-reliance on trucks.

The administration is urging the company to merge with Fiat and will offer capital to help bring that about. If Chrysler and Fiat are able to reach an agreement, the administration will consider loaning up to $6 billion to Chrysler. If the two companies cannot reach an agreement, the offer will be withdrawn.

"We will not be able to justify investing additional tax dollar to keep Chrysler in business," Obama said.

Chrysler welcomed the options laid out by the administration today.

"Chrysler has consistently said that the alliance with Fiat enhances its business model that expands its global competitiveness. We appreciate the willingness of the [White House's Auto] Task Force, along with industry and financial experts, to consult closely with us in order to achieve this significant step," said bob Nardelli, Chrysler LLC chairman and CEO, in a statement.

The Obama administration would not specify how much capital it might entail to keep either company going for another 30 to 60 days.

The president also made two other key announcements today.

First, Obama announced a government-backed warranty program for all new GM and Chrysler vehicles purchased during this reconstructing period.

A fund will be set up equal to 125 percent of the total cost to pay for warranty service. The automakers will contribute 15 percent while the government will provide 110 percent, with the money coming from the economic stabilization funds. A separate company will hold the funds and pay the claims even if one of the auto manufacturers goes into bankruptcy or goes out of business.

Second, Obama announced that Edward Montgomery would serve as director of recovery for autoworkers and communities. Montgomery, a labor economist and former deputy secretary of labor, will coordinate the administration's efforts to help autoworkers, communities and regions adversely affected by the failure off the automakers to find new jobs, businesses and industries.

Obama compared this new position to a federal coordinator appointed after a natural disaster.

  • 1
  • |
  • 2
  • |
  • 3
  • |
  • 4
Join the Discussion
blog comments powered by Disqus
You Might Also Like...