In a statement livecast on the Internet by the White House, President Barack Obama said that neither of the restructuring plans submitted by GM and Chrysler “goes far enough to warrant substantial new investment.”
In his short address, the President confirmed details that had emerged over the weekend about the next steps for the two auto makers. The government will provide GM with “adequate working capital” for 60 more days to “produce a better business plan”. Chrysler, which the government has determined requires a partner to survive, will have 30 days of working capital to conclude a deal with Fiat.
Noting that “GM has made a good faith effort to restructure,” the President said that the “plan in current form is not strong enough...I am confident that GM can rise again, providing that it undergoes a fundamental restructuring.”
Members of the Presidential Task Force on the Auto Industry will work with GM on the new, more stringent, plan, the President said, who also noted the resignation of GM CEO Rick Wagoner as an outcome of the process. (Earlier post.)
The US government has no interest in running GM. We have no intention of running GM. What we are interested in is giving GM an opportunity to make changes.—President Obama
Chrysler, the President said, is “more challenging”. Saying that the government had determined “with deep reluctance, but clear-eyed recognition of facts, that Chrysler needs a partner to remain viable”, the President said that the government give the company 30 days to see if it can close its deal with Fiat. If Chrysler and Fiat can come to “a sound agreement”, the President said, the government will consider lending up to and additional $6 billion to help them succeed.
If they and stakeholders are unable to reach an agreement, we can’t justify additional tax dollars to keep Chrysler in business.—President Obama
Obama noted that both companies may need to resort to a streamlined bankruptcy process to “clear away old debts weighing them down”.
In other efforts to support the struggling auto industry, the President said that:
The government will back the warranties on vehicles from GM and Chrysler.
The Administration is seeking to get Recovery Act funds to purchase government cars out as quickly as possible, which could bolster annual sales by some 100,000 units.
The government is accelerating its efforts through consumer and lending initiatives and working with auto finance companies to increase the flow of credit.
The Internal Revenue Service is beginning a campaign to alert consumers of a new credit that will enable the deduction of the cost of any sales and excise taxes for a new car purchased this year.
He backs the scrappage proposal (vehicle fleet modernization incentive program) in Congress, and is working with Congress to find funds for it in the Recovery Act, with the intention of making such an initiative retroactive to today.
The President said that the decisions on GM and Chrysler were being made after consultation with other affected governments, and that the government of Canada will make an announcement later today on its response to the plight of the two companies.