WASHINGTON (AP) - The White House forced the resignation of General Motors
Corp.'s top executive Sunday, on the eve of announcing new aid and a 60-day
deadline for the ailing auto giant to restructure. Chrysler LLC will get up
to $6 billion and 30 days to complete an alliance with Italian automaker
Two people familiar with the plan said Sunday it will demand further
sacrifices from the automakers and bankruptcy would still be possible if the
automakers failed to restructure. The officials spoke on condition of
anonymity because they were not authorized to make details public.
President Barack Obama was announcing his plan on Monday. It includes
government backing of warranties for GM and Chrysler vehicles to give
consumers confidence in the U.S. automakers' cars and trucks.
Detroit's automakers have 20 plants in Ohio. The biggest include a Chrysler
complex that makes Jeeps in Toledo and a General Motors factory in Lordstown
that produces the Cobalt and Pontiac G5 fuel-efficient cars.
Administration officials said Sunday that General Motors CEO Rick Wagoner
was stepping down immediately at the request of the White House, a sign of
major changes at the auto giant.
GM has already received $13.4 billion in government loans and Chrysler has
survived on $4 billion in federal aid. The automakers have been hard hit by
the economic downturn and the worst decline in auto sales in 27 years. In
progress reports filed with the government in February, GM asked for $16.6
billion more and Chrysler wanted $5 billion more.
But the officials said the Obama plan would not go that far, providing
short-term aid in exchange for significant sacrifices.
The officials said the administration did not view Chrysler to be viable as
a standalone company. Under the plan, the government would provide up to $6
billion to forge the alliance between Chrysler and Fiat, but if the
companies failed to reach an agreement or find an alternative plan for
viability, Chrysler would not receive additional federal aid.
Fiat executives have talked to the White House auto task force about a
proposal to acquire a 35 percent stake in Chrysler in exchange for small car
technology, transmissions and other items that Chrysler has valued at $8
billion to $10 billion.
General Motors, meanwhile, would have a limited window to work with the
United Auto Workers union, bondholders and other stakeholders and would
receive an undisclosed amount of "interim financing" over 60 days to
restructure the company. The officials said the administration would
determine how much GM would need in "permanent capital" during the 60-day
If GM failed to reach the concessions needed, some type of bankruptcy could
be used at the end of 60 days, the officials said.
The administration planned to send a team to Detroit to help with the
restructuring during the next 60 days. With Wagoner's departure, new
management would be decided by General Motors' board of directors in
consultation with the government. An official said a majority of the GM
board was expected to step down.
Obama, in an interview with CBS' "Face the Nation" broadcast Sunday, said
the companies must do more to receive additional financial aid from the
"We think we can have a successful U.S. auto industry. 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,"
Obama said the government would require a "set of sacrifices from all
parties involved, management, labor, shareholders, creditors, suppliers,
dealers. Everybody's gonna have to come to the table and say it's important
for us to take serious restructuring steps now in order to preserve a
brighter future down the road."
Both companies are trying to reduce their debt by two-thirds and persuade
the UAW to accept several cost-cutting measures.
Very little was being done in negotiations with debtholders and the union
ahead of Obama's announcement, a person briefed on the GM talks said Sunday.
This person did not want to be identified because the negotiations are
Under the terms of a loan agreement reached during the Bush administration,
GM and Chrysler are pushing the UAW to accept shares of stock in exchange
for half of the payments into a union-run trust fund for retiree health
care. They also want labor costs from the union to be competitive with
Japanese automakers with U.S. operations.
Neither GM nor Chrysler have deals with the union on the trust funding or
concessions from their debtholders and the administration has been trying to
accelerate those efforts.
GM and Chrysler, which employ about 140,000 workers in the U.S., face a
Tuesday deadline to submit completed restructuring plans, but neither
company is expected to finish its work. The administration's plan would be
designed to accelerate those efforts.
GM owes roughly $28 billion to bondholders. Chrysler owes about $7 billion
in first- and second-term debt, mainly to banks. GM owes about $20 billion
to its retiree health care trust, while Chrysler owes $10.6 billion.
In February, GM said it intended to cut 47,000 jobs around the globe, or
nearly 20 percent of its work force, close hundreds of dealerships and focus
on four core brands - Chevrolet, Cadillac, GMC and Buick.
Chrysler issued two scenarios in its February plan: one as a distinct
company, and the second in an alliance with Fiat. Chrysler said in its
February report that it would cut 3,000 workers and eliminate three vehicle
models, the Dodge Aspen, Dodge Durango and Chrysler PT Cruiser.
Thanks for the link, "Canuck" ;)