Monday, March 30, 2009
The president is expected to give GM only enough funding to operate for 60 more days.
McClatchy Newspapers
WASHINGTON — President Barack Obama will reject requests today for almost $22 billion in new taxpayer bailout money for General Motors Corp. and Chrysler, saying the carmakers have failed to take steps to ensure their viability.
The government demanded the resignation of GM chief Rick Wagoner and said the company needed to be widely restructured if it had any hope of survival. It said it would provide the company with 60 days operating capital to give it time to undertake reforms.
The government will grant Chrysler 30 days operating funds, but said it must merge with another carmaker in order to remain viable. Talks with Italian carmaker Fiat are under way.
The administration also announced a warranty-guarantee plan that administration officials hope will give consumers enough confidence that they will continue to buy the companies’ vehicles.
GM and Chrysler have already received $17.4 billion in government rescue money. The two companies faced a Tuesday deadline for the government to approve plans they had submitted weeks ago in hopes of persuading the Obama administration they could remain in business and deserved additional money.
But the decision from Obama was accompanied by unusually detailed assessments of the two companies’ business plans and prospects.
The administration, however, did not demand repayment of the earlier loans. It also did not completely slam the door on the additional $21.6 billion the carmakers sought, but sent the two back to the drawing board.
A senior administration official, briefing reporters late Sunday night on the condition of anonymity in order to speak freely, said Obama will call for more sacrifice from carmakers, their investors and automotive unions.
The official said there were encouraging signs the Chrysler merger with Fiat will happen soon. The administration wants this deal to happen, but has tried to avoid too big a stake by Fiat for fear taxpayers would be funding a foreign takeover.
Fiat will commit to produce fuel-efficient cars and engines in the U.S., and will be limited to a 49 percent stake until all taxpayer loans have been repaid. There are no expected leadership changes at Chrysler, given the ongoing merger talks.
Another senior administration official, also demanding anonymity, denied the administration required Wagoner’s ouster. But officials acknowledged they wanted a fresh start at GM, and Wagoner agreed to step aside. Other executives are also expected to depart.
Wagoner’s departure from GM is surprising given that he has been the public face of the struggling carmaker and has worked at GM at home and abroad since 1977, rising to CEO in 2000.
Wagoner’s long tenure saw days of glory, but GM was caught flatfooted as its fleet was heavy with trucks and sports utility vehicles that got weak fuel mileage as rising gasoline prices sent consumers looking for more fuel-efficient vehicles. GM was last profitable in 2004.