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Obama takes tighter grip on reform of troubled car firms
Source: Agencies |
March 31, 2009, Tuesday
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US President Barack Obama declared yesterday that General Motors and Chrysler restructuring plans were too little too late, leaving him no choice but to push out GM Chief Executive Officer Rick Wagoner and set a one-month deadline for Chrysler to merge with Italy's Fiat SpA.
Obama, who was stepping into the American industrial sector with a force not seen in generations, also raised the possibility of a controlled bankruptcy to help either or both companies to "restructure quickly and emerge stronger" - uttering the term that industry and union officials have warned repeatedly could lead to the collapse of an entire domestic industry.
But Obama sought to soften the blow.
"What I am not talking about is a process where a company is broken up, sold off, and no longer exists," the US president said. "And what I am not talking about is having a company stuck in court for years, unable to get out."
As the US economic recession deepened and the auto giants sought more taxpayer money, the president was performing radical surgery.
Dating to his days as a presidential candidate, Obama had been openly critical of the US auto industry, voicing deep dissatisfaction with the way the sector has done business.
Declaring he would no longer "excuse poor decisions" as the two companies tried to survive on "an unending flow of tax dollars," Obama said, "These companies and this industry must ultimately stand on their own, not as wards of the state."
The president acknowledged the pain being felt by Americans caught in the dizzying decline of the industry and blamed "a failure of leadership from Washington to Detroit that led our auto companies to this point."
However, Obama said his administration would try to encourage Americans to buy more US-made cars by offering some tax incentives to new buyers.
The US president stepped in after deciding General Motors Corp and Chrysler LLC had submitted unacceptable plans in return for billions more dollars they said was needed to stay in business. The struggling companies were already being kept afloat with huge emergency government rescue loans. GM had received US$13.4 billion; Chrysler US$4 billion.
On Wall Street, fears of an auto-maker bankruptcy pushed US stocks down more than 3.5 percent.
Obama said that the restructuring plans submitted by the companies, which employ about 140,000 workers in the United States, did not merit continued taxpayer help and needed to do much more. Tens of thousands of additional jobs could be in jeopardy in associated industries and businesses.
In return for the forced resignation of Wagoner and a shake-up in the auto giant's board, the Obama administration will provide GM 60 days of operating money to work out an acceptable restructuring in the face of an inevitable bankruptcy should it fail.
As a sweetener, Chrysler could get up to US$6 billion if it completes the alliance with Fiat within 30 days.
If a Chrysler-Fiat union cannot be completed, Washington plans to walk away, leaving Chrysler destined for a complete sell-off.
Obama, who was stepping into the American industrial sector with a force not seen in generations, also raised the possibility of a controlled bankruptcy to help either or both companies to "restructure quickly and emerge stronger" - uttering the term that industry and union officials have warned repeatedly could lead to the collapse of an entire domestic industry.
But Obama sought to soften the blow.
"What I am not talking about is a process where a company is broken up, sold off, and no longer exists," the US president said. "And what I am not talking about is having a company stuck in court for years, unable to get out."
As the US economic recession deepened and the auto giants sought more taxpayer money, the president was performing radical surgery.
Dating to his days as a presidential candidate, Obama had been openly critical of the US auto industry, voicing deep dissatisfaction with the way the sector has done business.
Declaring he would no longer "excuse poor decisions" as the two companies tried to survive on "an unending flow of tax dollars," Obama said, "These companies and this industry must ultimately stand on their own, not as wards of the state."
The president acknowledged the pain being felt by Americans caught in the dizzying decline of the industry and blamed "a failure of leadership from Washington to Detroit that led our auto companies to this point."
However, Obama said his administration would try to encourage Americans to buy more US-made cars by offering some tax incentives to new buyers.
The US president stepped in after deciding General Motors Corp and Chrysler LLC had submitted unacceptable plans in return for billions more dollars they said was needed to stay in business. The struggling companies were already being kept afloat with huge emergency government rescue loans. GM had received US$13.4 billion; Chrysler US$4 billion.
On Wall Street, fears of an auto-maker bankruptcy pushed US stocks down more than 3.5 percent.
Obama said that the restructuring plans submitted by the companies, which employ about 140,000 workers in the United States, did not merit continued taxpayer help and needed to do much more. Tens of thousands of additional jobs could be in jeopardy in associated industries and businesses.
In return for the forced resignation of Wagoner and a shake-up in the auto giant's board, the Obama administration will provide GM 60 days of operating money to work out an acceptable restructuring in the face of an inevitable bankruptcy should it fail.
As a sweetener, Chrysler could get up to US$6 billion if it completes the alliance with Fiat within 30 days.
If a Chrysler-Fiat union cannot be completed, Washington plans to walk away, leaving Chrysler destined for a complete sell-off.
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