Restructure or face bankruptcy, Obama tells US carmakersMarch 30th, 2009 - 11:31 pm ICT by IANS
Washington, March 30 (DPA) The struggling US car industry will be given one last chance to restructure operations or lose the government’s support, President Barack Obama announced Monday, declaring that General Motors Corp. and Chrysler LLC. had so far failed to prove that they can survive.
In a dramatic government intervention in the industry, Obama called for a series of changes to the car industry and forced out long-time GM chief executive Rick Wagoner, who will be replaced by the company’s president Fritz Henderson.
GM, the largest US carmaker, will be given 60 days to reach new deals with labour unions, creditors and others to return to profitability.
But the White House determined that Chrysler is unable to survive on its own. The third-largest US carmaker will have 30 days to reach an agreement to partner with Italian firm Fiat Motors SA., which is considering taking a minority stake in the company.
Obama said he was committed to the survival of the US car industry, which has been brought to the brink of collapse in the current recession.
“We cannot, and must not and we will not let our auto industry simply vanish,” Obama said. “But we cannot continue to excuse poor decisions. We cannot make the survival of our auto industry dependent on an unending flow of taxpayer dollars.”
US car sales plummeted more than 35 percent over the last few months. The US government agreed in December to give GM $13.5 billion and Chrysler $4 billion in emergency loans, but set a deadline of Tuesday for both to complete their restructuring efforts. Ford Motor Co. has not requested any government money.
Chrysler has asked for another $6 billion in government loans and GM says it could need more than $20 billion. But Obama said “neither goes far enough to warrant the substantial new investments that these companies are requesting”.
Obama said the survival of the industry would require sacrifices from labour unions, creditors, dealers and others. The government would provide the two companies with enough capital to survive until the new deadlines, but he held out the possibility of a bankruptcy for one or both firms if they cannot restructure on their own.
GM confirmed Monday that it will be overhauling its management in the coming weeks and that Henderson will take over as chief executive from Wagoner, who has had a tumultuous nearly nine years at the helm of the company.
GM has lost more than $80 billion in the last four years and in 2008 surrendered its title as the world’s largest carmaker to Japanese rival Toyota Motor Corp.
Wagoner, 56, who joined GM back in 1977, said he was confident the company would survive the downturn without him.
“GM is a great company with a storied history,” Wagoner said in a statement. “Ignore the doubters because I know it is also a company with a great future.”
A son of a GM sales manager, Henderson, 50, has held a number of positions with the company in nearly all continents.
As head of the GM’s German subsidiary Opel from mid-2004 through the end of 2005, Henderson restructured the company, trimming around 10,000 jobs and bringing it back to profitability for the first time in nearly five years.
Yet Opel, too, is currently seeking government funds to survive the global recession. German Chancellor Angela Merkel has said she will only help once GM’s restructuring plan is in place.
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