US toughens conditions for GM, Chrysler aid

Monday, March 30, 2009 at 9:54 PM Posted by Beijing News


US President Barack Obama hardened his positionon further aid for ailing Detroit automakers, giving General Motors and Chrysler new deadlines to come up with better viability plans.

Obama's auto task force said neither firm is viable at present, with GM in need of a "more aggressive" restructuring plan and Chrysler needing to seal a global alliance with Italian-based Fiat.

Obama said recovery for the sector will require "unprecedented" efforts, and that a bankruptcy court-supervised restructuring with government support is an option for the firms.

"We cannot, we must not, and we will not let our auto industry simply vanish," Obama said as his task force unveiled its findings.

"It is a pillar of our economy that has held up the dreams of millions of our people. But we also cannot continue to excuse poor decisions. And we cannot make the survival of our auto industry dependent on an unending flow of tax dollars."

Obama said that if GM and Chrysler cannot come up with viable plans, they may need to use the bankruptcy process "as a mechanism to help them restructure quickly and emerge stronger."

This type of bankruptcy reorganization would mean that the firms "with the backing of the US government" can "quickly clear away old debts that are weighing them down."

To help the automakers survive, Obama said, "it will take an unprecedented effort on all our parts -- from the halls of Congress to the boardroom, from the union hall to the factory floor."

GM chairman and chief executive Rick Wagoner was forced out at the request of Obama, as the task force unveiled grim prospects for the firms demanding an extra 21.6 billion dollars in government loans.

The task force warned neither firm had met the strict conditions laid down under an earlier 17.4 billion dollar government bailout agreed late last year.

The plans submitted by GM and Chrysler "did not establish a credible path to viability," the report said.

They will be given new deadlines and "an adequate amount of working capital to establish a new strategy for long-term economic viability."

GM was granted 60 days "to develop a more aggressive restructuring plan and a credible strategy," the report said.

The news prompted a huge stock market selloff, as GM shares slid 25 percent. Ford, which is not seeking government aid, dropped 2.8 percent.

GM said it maintained a "strong preference" to stay out of bankruptcy court by saying it "will take whatever steps are necessary to successfully restructure the company, which could include a court-supervised process."

Meanwhile, Wagoner will not depart GM emptyhanded.

A company spokesman said Monday he will receive some 20 million dollars in retirement benefits and other compensation.

Edmunds.com CEO Jeremy Anwyl said such a plan could improve sales: "Hopefully it must be implemented quickly, since an increase in car sales will boost consumer confidence and jump start the economy at large."





Staples

0 comments:

Post a Comment

Subscribe to: Post Comments (Atom)