President rejects GM, Chrysler rescue plans
Obama warns cash infusion could be last
WASHINGTON - President Barack Obama asserted unprecedented government control over the auto industry yesterday, bluntly rejecting turnaround plans by
Obama took the extraordinary step of saying the government will back new car warranties issued by both GM and Chrysler, an attempt to reassure consumers their US-made purchases will be protected, even if the companies don't survive.
"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," Obama said. And yet, he added, "our auto industry is not moving in the right direction fast enough to succeed."
Obama unveiled a short-term infusion of cash for the companies, and said it could be the last.
Chrysler, judged by the administration as too small to survive, got 30 days' worth of funds to complete a partnership with
GM got assurances of 60 days' worth of federal financing to try and revise its turnaround plan under new management with heavy government participation. That would involve concessions from union workers and bondholders. The administration engineered the ouster of CEO Rick Wagoner over the weekend.
Obama's comments underscored the extent to which automakers have been added to the list of large corporations now operating under a level of government control that seemed unthinkable less than a year ago. Since last fall, the Bush and Obama administrations, often acting in concert with the Federal Reserve, have engineered the takeover of housing titans
The auto industry has long struggled with foreign competition, and is now being further battered by the recession and credit crisis. Obama said 400,000 industry jobs have been lost in the past year alone.
Under new CEO Fritz Henderson, General Motors issued a statement saying it hopes to avoid bankruptcy, but will "take whatever steps are necessary to successfully restructure the company, which could include a court-supervised process."
Chrysler chairman Bob Nardelli sought to assure customers, dealers, suppliers, and employees that the automaker "will operate 'business as usual' over the next 30 days" while working with the government and Fiat to secure the support of stakeholders.
Obama said bankruptcy would be a way for either GM or Chrysler to "quickly clear away old debts that are weighing them down so they can get back on their feet," and stressed that either firm would remain open.