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BREAKING! OBAMA SAYS NO TO DETROIT ... NO MORE LOANS! MUST RESTRUCTURE

 
MercurialStorm
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03/30/2009 01:09 AM
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BREAKING! OBAMA SAYS NO TO DETROIT ... NO MORE LOANS! MUST RESTRUCTURE
The White House says neither GM nor Chrysler submitted acceptable plans to receive more bailout money, setting the stage for a crisis in Detroit and putting in motion what could be the final two months of two American auto giants.

The Obama administration, however, has decided not to require the automakers to immediately repay government loan money they previously received, since that would force both companies into Chapter 11 bankruptcy.

A senior administration official told FOX News, "calling in the loans would not be a productive exercise for the American taxpayer since the companies don't have the money [to repay the loans] and it would simply put the companies into uncontrolled Chapter 11."

Obama was set to make the announcement at 11 a.m. Monday in the White House's foyer.

In an interview with CBS' "Face the Nation" broadcast Sunday, Obama said the companies must do more to receive additional financial aid from the government.

"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.

Instead, the administration has decided to give Chrysler 30 days to work out a deal with Fiat and GM 60 days to come up with a new restructuring plan. Both companies will be provided with "some working capital" during those time periods.

A senior official said, "bankruptcy is not the goal," although there may be a "role for a court supervised process to effect the restructuring... different from Chapter 11."

Two additional parts of the plan include the government standing behind both car companies' warranties during the restructuring periods and the White House naming a Labor Department official to minimize the impact of restructuring on communities where auto plants are located, by coordinating support for workers and their families.

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.

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.

Officials say GM and Chrysler were treated differently because of differences in the companies.

Neither company is viable now, but Chrysler is an almost purely domestic company that has passed through several ownership changes and is not viable as a standalone company. It was "never in position to pay down its debt." GM is a global company with "a more substantial collection of assets and brands," and its cars received a higher ranking from Consumer Reports.

Officials say they are "confident GM can survive and thrive as a company... but it will take more significant restructuring."

No decision has yet been made about how much working capital the government will provide GM during the restructuring period.

Chrysler's potential deal with Fiat has a couple of requirements: Fiat's ownership must initially be less than the 35% US Government stake in the company, and it's not to rise above 49% until the new loan money is fully repaid. Chrysler will be provided up to $6 billion in additional working capital during the restructuring period.

In his comments tomorrow, Obama "will be clear that greater sacrifices are required from all stakeholders," officials said.

His aides had substantial criticism of bondholders, saying not only did GM's bondholders fail to meet the targets for reducing the company's liability under the loan agreement, the loan agreement's target weren't adequate for the current market environment.

Officials confirmed GM CEO Rick Wagoner was asked to leave, but denied it was a condition for receiving more government aid. The official said "we wanted to start GM with a clean sheet of paper. We felt the change in leadership would assist that."

The Associated Press contributed to this report.

[link to www.foxnews.com]

Last Edited by MercurialStorm on 03/30/2009 01:11 AM
MercurialStorm (OP)

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03/30/2009 01:10 AM
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Re: BREAKING! OBAMA SAYS NO TO DETROIT ... NO MORE LOANS! MUST RESTRUCTURE
[link to www.bloomberg.com]

March 30 (Bloomberg) -- General Motors Corp. and Chrysler LLC must overhaul their recovery plans with deeper concessions to justify further taxpayer aid, and bankruptcy may ultimately be their best chance, an Obama administration official said.

The administration asked GM Chief Executive Officer Rick Wagoner to step down, and he will be replaced by Fritz Henderson, the company’s chief operating officer. GM will also replace most of its board and must place greater reliance on producing more fuel-efficient vehicles, under findings to be announced today at the White House by President Barack Obama.

Chrysler will get $6 billion in aid only if it completes a partnership with Italian carmaker Fiat SpA in 30 days, said the official, who spoke to reporters and declined to be identified before Obama presents the decision. Unless it combines with Fiat, Chrysler won’t get any more U.S. help because it isn’t viable as a stand-alone company, the administration found.

GM sought as much as $16.6 billion in additional aid after receiving $13.4 billion since December. Chrysler sought $5 billion after receiving $4 billion. Both had to show progress by the end of this month in matters such as GM’s need to reduce unsecured debt by two-thirds.

Neither company completed the tasks, the administration official said. The aid plans submitted to the government Feb. 17 don’t warrant additional assistance, the administration concluded.

GM’s plan wouldn’t lead to success even in an improved economy, the administration found. The new strategy sought by the administration would focus on sustainable profit and significant changes in brands, workforce, nameplates and the retail network. Board member Kent Kresa will serve as GM’s interim chairman.

Greater Guidance

GM, which will continue to receive an undisclosed amount of government aid as it develops a new plan over 60 days, will get greater guidance from the Treasury and outside advisers in the process than previously, according to the administration. The government was silent on how much more aid GM may receive if it devises a successful plan.

Chrysler’s plan included assumptions that were unrealistic or overly optimistic, according to the administration. Chrysler is being required to get greater concessions from the United Auto Workers than its plan requires and must get rid of the vast majority of outstanding secured debt.

The government will support Chrysler for 30 days as it attempts to make final its agreement with Fiat. Chrysler has proposed giving Fiat a 35 percent stake in the company.

Both companies’ best chance at success may include a quick and surgical bankruptcy, according to the administration. Unlike a liquidation or conventional bankruptcy, a structured process would make it easier for the companies to clear away liabilities. Still, bankruptcy isn’t the administration’s first choice, the official said.

Warranties Guaranteed

To help encourage car sales, the administration will back warranties so consumers who buy cars during the restructuring have confidence the guarantees will be honored even if the companies go out of business, according to the administration.

Edward Montgomery, an economist and former Labor Department deputy secretary, will be appointed to a new post of Auto Recovery Director to help communities hurt by job loss in the industry.
FrozenHummock

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03/30/2009 01:10 AM
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Re: BREAKING! OBAMA SAYS NO TO DETROIT ... NO MORE LOANS! MUST RESTRUCTURE
Holy Shit !

Too many words !
Denial is not a river in Egypt, it's what happens to some people when things seem to big to deal with.
WomanInBlack

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03/30/2009 01:13 AM
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Re: BREAKING! OBAMA SAYS NO TO DETROIT ... NO MORE LOANS! MUST RESTRUCTURE
He should have said it a few bailouts ago...
We forfeit three-fourths of ourselves in order to be like other people.

Les Ruines De La Modernité-Pendaison De L'Humanité
Hiro Protagonist

User ID: 501302
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03/30/2009 01:21 AM
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Re: BREAKING! OBAMA SAYS NO TO DETROIT ... NO MORE LOANS! MUST RESTRUCTURE
bsflag

They'll get their money. It's all a show for the sheep
Yours Truly!
MercurialStorm (OP)

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03/30/2009 01:29 AM
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Re: BREAKING! OBAMA SAYS NO TO DETROIT ... NO MORE LOANS! MUST RESTRUCTURE
I was surprised because I thought they were going to get their billions
MercurialStorm (OP)

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03/30/2009 01:36 AM
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Re: BREAKING! OBAMA SAYS NO TO DETROIT ... NO MORE LOANS! MUST RESTRUCTURE
bump
Anonymous Coward
User ID: 641266
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03/30/2009 01:43 AM
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Re: BREAKING! OBAMA SAYS NO TO DETROIT ... NO MORE LOANS! MUST RESTRUCTURE
I agree. They can sell their beachfront high rises. Shiny highrises..
Anonymous Coward
User ID: 645858
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03/30/2009 01:44 AM
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Re: BREAKING! OBAMA SAYS NO TO DETROIT ... NO MORE LOANS! MUST RESTRUCTURE
Damn! Now I'll never get that new Corvette.....

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