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Obama gives car firms deadlines Obama gives car firms deadlines
(20 minutes later)
President Barack Obama has given US carmakers GM and Chrysler strict deadlines to complete restructuring before receiving more state aid.President Barack Obama has given US carmakers GM and Chrysler strict deadlines to complete restructuring before receiving more state aid.
General Motors will be given 60 days and Chrysler just 30 days to submit new plans for recovery.General Motors will be given 60 days and Chrysler just 30 days to submit new plans for recovery.
Soon after ordering the resignation of GM chief Rick Wagoner, Mr Obama also offered assurances about the industry's future.Soon after ordering the resignation of GM chief Rick Wagoner, Mr Obama also offered assurances about the industry's future.
But any further assistance would come with strict conditions attached.But any further assistance would come with strict conditions attached.
Mr Obama insisted that more must be done by the firms. "We cannot, we must not and we will not let our auto industry simply vanish," said Mr Obama.
The president's auto task force has ruled that the two carmakers have not met conditions on loans already made. "But our auto industry is not moving in the right direction fast enough to succeed."
"The plans submitted by GM and Chrysler did not establish a credible path to viability. He said the car firms had run into trouble because of a "failure of leadership - from Washington to Detroit."
"In their current form, they are not sufficient to justify a substantial new investment of taxpayer resources," it said. Talking of the restructuring plans already submitted by the carmakers, who are looking for more than $20bn of government aid, Mr Obama said: "After careful analysis, we have determined that neither goes far enough to warrant the substantial new investments that these companies are requesting.
The state will guarantee capital only for the next few weeks, it said. "My administration will offer GM and Chrysler a limited period of time with creditors, unions, and other stakeholders to fundamentally restructure in a way that would justify an investment of additional tax dollars."
The president also said he would work with Congress on a programme to encourage consumers to replace old, less fuel efficient cars with newer, cleaner vehicles.
Germany has adopted a similar scheme, which has boosted vehicle sales.
'Far too slow''Far too slow'
GM has been told to come up with a new, more radical restructuring plan in order to qualify for further funds.GM has been told to come up with a new, more radical restructuring plan in order to qualify for further funds.
We think we can have a successful US auto industry President Barack Obama Wagoner ousted by Obama End of the road for Rick Wagoner We have determined that neither goes far enough to warrant the substantial new investments that these companies are requesting President Barack Obama Wagoner ousted by Obama End of the road for Rick Wagoner
The task force said in a written report that GM "could be a viable business with a more aggressive restructuring plan". The auto task force set up by the US administration to oversee the government bail-out of the carmakers said in a written report that GM "could be a viable business with a more aggressive restructuring plan".
The carmaker has already announced tens of thousands of job cuts and a number of factory closures in order to cut costs that have spiralled out of control as sales have slumped during the economic downturn.The carmaker has already announced tens of thousands of job cuts and a number of factory closures in order to cut costs that have spiralled out of control as sales have slumped during the economic downturn.
But the task force criticised GM's progress on current restructuring efforts for being "far too slow".But the task force criticised GM's progress on current restructuring efforts for being "far too slow".
The task force has given the company 60 days to come with the new plan and will provide financial assistance during that time.The task force has given the company 60 days to come with the new plan and will provide financial assistance during that time.
In Chrysler's case, it questioned whether the company could survive alone and demanded a merger with Italy's Fiat - the two firms created a strategic alliance earlier this year - or another carmaker.In Chrysler's case, it questioned whether the company could survive alone and demanded a merger with Italy's Fiat - the two firms created a strategic alliance earlier this year - or another carmaker.
The firm's "fundamentally disadvantaged operating structure and a limited set of desirable products make stand-alone viability for the business highly challenging," it said.The firm's "fundamentally disadvantaged operating structure and a limited set of desirable products make stand-alone viability for the business highly challenging," it said.
The US government would provide working capital for a further 30 days while a merger was discussed, it added.The US government would provide working capital for a further 30 days while a merger was discussed, it added.
If a merger is successful, then the government "will consider investing up to the additional $6bn requested by Chrysler", the task force said.If a merger is successful, then the government "will consider investing up to the additional $6bn requested by Chrysler", the task force said.
Richard Lister, BBC News, Detroit The cold and grey in snowy Detroit is an accurate reflection of the mood here as people wake up to the idea that their industrial landscape has changed again. President Obama has swept aside one of the pillars of the car industry here. Mr Wagoner was a GM veteran, so on local talk shows his resignation was met with some incredulity that he could be forced out by Washington, with one caller insisting he was the victim of and not the creator of the global recession. Both in urban Detroit and surrounding rural Michigan there is a deep set conservatism that instinctively dislikes this level of government intervention. But there is mounting nervousness too. Mr Wagoner had already pledged to cut a fifth of GM's global workforce and close 14 factories. By forcing him to go, President Obama is clearly saying is, that's not enough. End of the road for Rick Wagoner Richard Lister, BBC News, Detroit The cold and grey in snowy Detroit is an accurate reflection of the mood here as people wake up to the idea that their industrial landscape has changed again. President Obama has swept aside one of the pillars of the car industry here. Mr Wagoner was a GM veteran, so on local talk shows his resignation was met with some incredulity that he could be forced out by Washington, with one caller insisting he was the victim of and not the creator of the global recession. Both in urban Detroit and surrounding rural Michigan there is a deep set conservatism that instinctively dislikes this level of government intervention. But there is mounting nervousness too. Mr Wagoner had already pledged to cut a fifth of GM's global workforce and close 14 factories. By forcing him to go, President Obama is clearly saying is, that's not enough. End of the road for Rick Wagoner
In an interview with US broadcaster CBS, President Obama said the firms must do more to justify further aid, saying: "They're not there yet."
"We think we can have a successful US auto industry," the president said.
"But it's got to be one that's realistically designed to weather this storm and to emerge at the other end much more lean, mean, and competitive than it currently is."
BankruptcyBankruptcy
The task force did not, however, rule out bankruptcy for either firm.The task force did not, however, rule out bankruptcy for either firm.
"Their best chance at success may well require utilising the bankruptcy code in a quick and surgical way," it said."Their best chance at success may well require utilising the bankruptcy code in a quick and surgical way," it said.
The two carmakers have already received $17.4bn (£14.4bn) in bail-outs. Chrysler has requested a further $5bn, while GM says it needs $16.6bn more.The two carmakers have already received $17.4bn (£14.4bn) in bail-outs. Chrysler has requested a further $5bn, while GM says it needs $16.6bn more.
President Obama also ordered the resignation of GM's chairman and chief executive Rick Wagoner.President Obama also ordered the resignation of GM's chairman and chief executive Rick Wagoner.
Mr Wagoner will be replaced by Fritz Henderson, who is GM president and chief operating officer.Mr Wagoner will be replaced by Fritz Henderson, who is GM president and chief operating officer.
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