Obama asks GM, Chrysler to shape up or ship out
President Barack Obama on Monday took control of the troubled US auto industry, giving General Motors 60 days and Chrysler 30 days to make a final push toward proving they can run viable businesses.autos Updated: Mar 31, 2009 00:18 IST
President Barack Obama on Monday took control of the troubled US auto industry, giving General Motors 60 days and Chrysler 30 days to make a final push toward proving they can run viable businesses.
Announcing his rescue plans for the two ailing automakers, which have already been given $17.4 billion to keep them running, he said the government would try to help the companies, but prescribed tough conditions holding out the threat of a "structured bankruptcy".
"We cannot, we must not, and we will not let our auto industry simply vanish," Obama said from the White House. "This industry is, like no other, an emblem of the American spirit; a once and future symbol of America's success."
The formal announcement of government plans came after White House forced out General Motors Corp's chief executive Rick Wagoner and pushed Chrysler LLC toward a merger suggesting the two had failed in their own turnaround efforts.
The federal government will provide operating funds for both automakers for several weeks, during which time the companies will have to undergo significant restructuring, administration officials said late Sunday night.
At GM, part of that restructuring began early Monday with Wagoner, a 32-year veteran of the company who has served in the top post since 2000, announcing his resignation which he said came at the request of the Obama administration.
"On Friday I was in Washington for a meeting with administration officials. In the course of that meeting, they requested that I 'step aside' as CEO of GM, and so I have," Wagoner said in a statement posted to the GM website.
Wagoner will be replaced by GM's chief operating officer, Fritz Henderson. Kent Kresa will serve as interim chairman.
GM will get 60 days and Chrysler 30 days in which to make a final push toward proving they can run viable businesses. If Chrysler succeeds, it will receive a $6 billion loan. In GM's case, the officials would not specify how much money the carmaker might receive.
In the case of both companies, the officials said, stakeholders - and particularly debt holders in both companies - had not done enough to relieve the automakers of ongoing financial burdens.
In order to help assuage consumer fears about buying cars from these companies as they restructure, the government is also setting aside funds to back up warranties on vehicles GM and Chrysler sell.