Car giants hit with Obama deadlines

Mar 31 2009 by Iain Laing, The Journal

CAR makers General Motors and Chrysler have been put on 60 days and 30 days notice to prove that they can be run as viable businesses.

The White House has said it is prepared to provide additional assistance to the two struggling firms during the period, but if no solution is found, bankruptcy is an option.

Unveiling his plan, President Barack Obama said it was important to face problems in the car manufacturing sector head-on, adding: “We cannot, we must not, let our auto industry simply vanish.”

In effect, GM will be given capital to survive for 60 days while it works on a new business plan. As an initial step, GM’s chairman and chief executive, Rick Wagoner, has been forced to resign. Someone with a “new vision” is needed, Mr Obama said.

Chrysler has been given a month to come up with an agreement with Italian car firm Fiat. If a merger is achieved, the US government will sweeten the deal with a loan of up to £4.2bn.

Yesterday’s announcement preceded today’s formal deadline for both GM and Chrysler to submit acceptable restructuring plans in return for billions of dollars they say is needed to prop them up.

Mr Obama said careful analysis revealed that neither of the blueprints went far enough to warrant new government investment. He said: “And so today I am announcing that my administration will offer GM and Chrysler a limited period of work with creditors, unions, and other stakeholders to fundamentally restructure in a way that would justify an investment of additional tax dollars – a period during which they must produce plans that would give the American people confidence in their long-term prospects for success.”

The president held out the possibility of using the country’s bankruptcy codes as a tool to free the firms from debt if an alternative solution cannot be found.

Although the government intends to mitigate job losses in the sector – with additional support to “auto towns” pledged – Mr Obama said he could not promise that there was not “more pain” to come.

He said: “These efforts, as essential as they are, will not make everything better overnight. There are jobs that cannot be saved. There are plants that will not reopen.

“And there is little I can say that can subdue the anger or ease the frustration of all whose livelihoods hang in the balance because of their failures that weren’t theirs.”