Monday, March 30th, 2009 at 12:53 pm
GM & Chrysler
This morning the President announced that his Auto Task Force has completed its evaluation of the viability of General Motors and Chrysler in light of their requests for federal assistance. In addition to releasing the viability assessments, he also released a new policy with the American government guaranteeing warrantees for cars from those companies to ensure that if you have one it "will be safer than it's ever been":
Fact Sheet on the New Path to Viability for GM & Chrysler (pdf) >>
Warrantee Commitment Program Explanation (pdf) >>
GM Viability Assessment (pdf) >>
Chrysler Viability Assessment (pdf) >>
In the course of his remarks, the President pledged in no uncertain terms that he would not simply stand by and watch the American auto industry fail. He pledged to work with Congress on further action. And he made clear that the government has no interest in running these companies.
In broader terms, he laid out early what led to his decisions announced today, the bottom line being that the Task Force has determined the companies’ submitted plans to restructure simply do not go far enough:
And so today I'm announcing that my administration will offer GM and Chrysler a limited additional period of time to work with creditors, unions, and other stakeholders to fundamentally restructure in a way that would justify an investment of additional taxpayer dollars. During this period they must produce plans that would give the American people confidence in their long-term prospects for success.
Now, what we're asking for is difficult. It will require hard choices by companies. It will require unions and workers who have already made extraordinarily painful concessions to do more. It'll require creditors to recognize that they can't hold out for the prospect of endless government bailouts. It'll have to -- it will require efforts from a whole host of other stakeholders, including dealers and suppliers. Only then can we ask American taxpayers who have already put up so much of their hard-earned money to once more invest in a revitalized auto industry.
But I'm confident that if each are willing to do their part, if all of us are doing our part, then this restructuring, as painful as it will be in the short term, will mark not an end, but a new beginning for a great American industry -- an auto industry that is once more out-competing the world; a 21st century auto industry that is creating new jobs, unleashing new prosperity, and manufacturing the fuel-efficient cars and trucks that will carry us towards an energy-independent future. I am absolutely committed to working with Congress and the auto companies to meet one goal: The United States of America will lead the world in building the next generation of clean cars.
He laid out his prescription for GM:
GM has made a good faith effort to restructure over the past several months -- but the plan that they've put forward is, in its current form, not strong enough. However, after broad consultation with a range of industry experts and financial advisors, I'm absolutely confident that GM can rise again, providing that it undergoes a fundamental restructuring. As an initial step, GM is announcing today that Rick Wagoner is stepping aside as Chairman and CEO. This is not meant as a condemnation of Mr. Wagoner, who's devoted his life to this company and has had a distinguished career; rather, it's a recognition that will take new vision and new direction to create the GM of the future.
In this context, my administration will offer General Motors adequate working capital over the next 60 days. And during this time, my team will be working closely with GM to produce a better business plan. They must ask themselves: Have they consolidated enough unprofitable brands? Have they cleaned up their balance sheets, or are they still saddled with so much debt that they can’t make future investments? Above all, have they created a credible model for how not only to survive, but to succeed in this competitive global market?
And he explained the differences underlying his prescription for Chrysler:
The situation at Chrysler is more challenging. It's with deep reluctance but also a clear-eyed recognition of the facts that we've determined, after careful review, that Chrysler needs a partner to remain viable. Recently, Chrysler reached out and found what could be a potential partner -- the international car company Fiat, where the current management team has executed an impressive turnaround. Fiat is prepared to transfer its cutting-edge technology to Chrysler and, after working closely with my team, has committed to build -- building new fuel-efficient cars and engines right here in the United States. We've also secured an agreement that will ensure that Chrysler repays taxpayers for any new investments that are made before Fiat is allowed to take a majority ownership stake in Chrysler.
Still, such a deal would require an additional investment of taxpayer dollars, and there are a number of hurdles that must be overcome to make it work. I'm committed to doing all I can to see if a deal can be struck in a way that upholds the interests of American taxpayers. And that's why we'll give Chrysler and Fiat 30 days to overcome these hurdles and reach a final agreement -- and we will provide Chrysler with adequate capital to continue operating during that time. If they are able to come to a sound agreement that protects American taxpayers, we will consider lending up to $6 billion to help their plan succeed. But if they and their stakeholders are unable to reach such an agreement, and in the absence of any other viable partnership, we will not be able to justify investing additional tax dollars to keep Chrysler in business.
He ended on a hopeful note, however, making clear that his decisions were not made out of despair, but out of certainty that the ingenuity and determination Americans and these companies have shown for decades.