BREAKING! OBAMA SAYS NO TO DETROIT ... NO MORE LOANS! MUST RESTRUCTURE | |
MercurialStorm (OP) User ID: 645838 Canada 03/30/2009 01:10 AM Report Abusive Post Report Copyright Violation | [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. |
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