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White House moves dramatically on auto industry

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PIZZABUSTER1   Monday, 03/30/09 10:51:30 PM
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White House moves dramatically on auto industry
White House moves dramatically on autos, GM's Wagoner ousted, Chrysler must merge with Fiat
Steven R. Hurst, Associated Press Writer
Monday March 30, 2009, 8:30 am EDT
Buzz up! Print Related:Ford Motor Co., General Motors Corporation, Northrop Grumman Corporation
WASHINGTON (AP) -- The White House was stepping into America's industrial sector with a force not seen in generations, as President Barack Obama planned Monday to tell the nation why he forced the chief at crippled General Motors to retire and gave Chrysler a month to hook up with Italy's Fiat SpA.

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{"s" : "f,gm,noc","k" : "c10,l10,p20,t10","o" : "","j" : ""} Dating to his days as a presidential candidate, Obama had been openly warning the U.S. auto industry of his deep dissatisfaction with the way it has done business. As the country's economic recession deepened and the auto giants sought more taxpayer money, the president acted to force fundamental changes in the industry.

On Sunday, his administration acted as the Tuesday deadline approached for General Motors Corp. and Chrysler LLC to submit acceptable restructuring plans in return for billions more dollars they said was needed to stay in business. The struggling companies were already being kept afloat with huge emergency government rescue loans. GM had received $13.4 billion; Chrysler $4 billion.

The president was to explain that the companies, which employ about 140,000 workers in the United States, were preparing to hand in proposals that did not merit continued taxpayer help and needed to do much more. Tens of thousands more workers jobs could be in jeopardy in associated industries and businesses.

Ford Motor Co., the third of the industry's Big Three, has taken no government money and is not affected.

In return for the forced resignation of CEO Rick Wagoner and a shake-up in the auto giant's board, the administration will provide GM 60 days of operating money to work out an acceptable restructuring in the face of an inevitable bankruptcy should it fail.

Chrysler will get up to $6 billion and 30 days to complete an alliance with Fiat. Chrysler and Fiat have been in talks, but Obama forced the issue Sunday, setting the deadline and adding as a sweetener the promise of $6 billion more in government assistance if the deal is done on time. If a Chrysler-Fiat union cannot be completed, Washington plans to walk away, leaving Chrysler destined for a complete sell-off. No other money is available.

At GM, president and chief operating officer Fritz Henderson took over as CEO, the company said in a statement released early Monday. Board member Kent Kresa, the former chairman and CEO of defense contractor Northrop Grumman Corp., was named interim chairman of the GM board.

New directors will make up the majority of GM's board, the statement said. The directors who will be replaced have not yet been named.

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, according to administration officials spoke on condition of anonymity because they were not authorized to make details public.

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 period.

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 television broadcast Sunday, said the companies must do more.

"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.

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 private.

Under the terms of a loan agreement reached during George W. Bush's 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.

AP Auto Writer Tom Krisher in Detroit and AP writers Philip Elliott and Ken Thomas in Washington contributed to this report.


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