http://money.cnn.com/2009/03/29/news/companies/gm_bailout/index.htm Obama aides flunk GM and Chrysler White House says automakers' turnaround plans do not justify much more taxpayer-funded assistance. GM chief Wagoner forced out. By Peter Valdes-Dapena, CNNMoney.com senior writer Last Updated: March 30, 2009: 6:12 AM ET NEW YORK (CNNMoney.com) -- The Obama administration gave General Motors and Chrysler LLC failing grades Monday for their turnaround efforts and promised a sweeping overhaul of the troubled companies. The government plans to give the automakers more money, but it is also holding out the threat of a "structured bankruptcy." The federal government will provide operating funds for both automakers for several weeks, during which time the companies will have to undergo significant restructuring, administration officials said late Sunday night. At GM, part of that restructuring began early Monday when CEO Rick Wagoner announced his resignation, which he said came at the request of the Obama administration. President Obama is expected to make a formal announcement later in the day about his plans for the companies, which have already been given $17.4 billion. GM (GM, Fortune 500) will get 60 days and Chrysler 30 days in which to make a final push toward proving they can run viable businesses. If Chrysler succeeds, it will receive a $6 billion loan. In GM's case, the officials would not specify how much money the carmaker might receive. In the case of both companies, the officials said, stakeholders - and particularly debt holders in both companies - had not done enough to relieve the automakers of ongoing financial burdens. "We have made very clear that we expect a very, very substantial reduction in liability for both companies," one official said. The administration also said a structured bankruptcy is possible. "While Chrysler and GM are different companies with different paths forward, both have unsustainable liabilities and both need a fresh start," according to an administration document. "Their best chance at success may well require utilizing the bankruptcy code in a quick and surgical way." In order to help assuage consumer fears about buying cars from these companies as they restructure, the government is also setting aside funds to back up warranties on vehicles GM and Chrysler sell. GM: Changes at the top The administration officials were far more positive in their tone regarding the prospects for GM than for its smaller rival. "We are very confident GM can survive and thrive as a company," one official said, noting the company's global reach, the strength of its research and development and the power of its various brands. Nevertheless, significant changes are on the table. One was the resignation of chief executive Wagoner, a 32-year veteran of the company who has served in the top post since 2000. "On Friday I was in Washington for a meeting with administration officials. In the course of that meeting, they requested that I 'step aside' as CEO of GM, and so I have," Wagoner said in a statement posted to the GM Web site. Wagoner will be replaced by GM's chief operating officer, Fritz Henderson. Kent Kresa will serve as interim chairman. "Having worked closely with Fritz for many years, I know that he is the ideal person to lead the company through the completion of our restructuring efforts. His knowledge of the global industry and the company are exceptional, and he has the intellect, energy, and support among GM'ers worldwide to succeed," Wagoner said. "We view our approach to GM as starting with a clean sheet of paper," the Treasury official said. The officials said they had committed to working with GM to create a leaner, more competitive company. Administration officials will be in Detroit working very closely with the GM executives on a plan to restructure the company and its debt obligations, the officials said. The administration officials would not say how much more money they might ultimately lend to GM or how much working capital the automaker would need to make it through the next 60 days. Chrysler: Fiat or bust For its part, Chrysler was too reliant on the domestic auto market, according to the officials. In addition, a significant "hollowing out" of the company by its past owners had left it unable to compete effectively as a stand-alone company, the officials said. Any restructuring for Chrysler would have to involve a partnership, most likely a deal with Fiat which has had an "agreement in principal" with Chrysler since January. Chrysler is getting 30 days to work out a deal with Fiat, which is the only way the officials believe the carmaker will survive. If that can happen, the administration is prepared to lend Chrysler $6 billion dollars more. While government officials said it was their "goal, hope and ambition" for a Chrysler-Fiat deal to work, the agreement terms would need to be modified from what the companies had previously announced. Fiat had originally planned to take a 35% stake in Chrysler, but that stake would have to be lower. Fiat would also not be allowed to own a majority stake in Chrysler until after all government loans have been repaid. There is sufficient money in existing funds to finance these plans, the officials said, who added that there would be no immediate need to ask Congress to appropriate more.
If he's the guy that approved building a separate Hummer dealership in every city in America, he probably needs to be fired.
Wagoner deserves a lot of credit for GM's current condition in more than one way. He deserves a lot of credit for the current quality of GM cars, which is the best it's ever been. He also deserves a lot of credit for their financial shape. He's the one that let GMAC really jump into the subprime market. He's the one that allowed the unions to keep the insane unemployment benefits in the contract when Ford called the union's bluff on them. It's sad, but he'd be out of a job anyway if GM goes through bankruptcy. I just think that a country that will keep zombie banks alive at all costs, but will let manufacturing companies die, has its priorities way out of whack.
This is an exceptionally dangerous precedent set by our over-reaching feral government. Firing the CEO of a private entity? This is beyond socialism, this is another move towards communism. Obama is wanting to have even greater power and control to implement his social and policy agenda -- just watch. This isn't about GM's profitability. This is about CAFE standards, labor movements, and green iniatiatives. The problem with those three things is that they don't work economically, and they will not restore GM to health. If they did, believe me, they would have been pushed a long time ago. What does Barack Mugabe Obama know about running an auto business? Nothing. Folks, hear me now. Barack Obama is entangled in a dangerous game of 'screwing the wealthy elite' and redistributing wealth to the inner city. This is his mindset, learned from 'community organizing' in South Chicago. Deep inside, he despises the existing power structure and our financial and economic freedoms. Is he racially motivated? I hope not.
i know you want attention but how can you possibly call gm private at this point? it's like calling aig private.
dispense w the rehtorical BS. W bailed out AIG months before he left office; yet, no words from you of his socialistic policy mind you, the most successful program to redistribute wealth over the past 25 years was implemented by teh Reagan Administration. it is the Earned Income Tax Credit.
I'm guessing Chrysler is going to be gone eventually, but there's no way the gov't lets GM go into bankruptcy, in my opinion. It's an open question as to whether GM going into Ch11 would lead to Ch7, but if it did, that would be another massive wave down in the economy, and there's no way the gov't would take that change, IMO. They are using this is a way to force both sides back to the table for more concessions.
ahh...so the reason you were ripping me yesterday was because you thought i was republican. now it makes sense.
Maybe. If so, it's a very high stakes game of chicken. I'm not saying I disagree with Obama's stance, but this seems bold. I'm nervous. Hope it works out.
rofl...obama just said the govt has no interest in running gm but they just fired gm's ceo. i love it. man this guy is smooth.
Dumb question: Isn't Fiat basically bankrupt, too? How does Chrysler merging with Fiat do anything but make it "too big to fail".
Nice move, if the bozo is just going to keep his hand out and continue the same way of running a company, out he goes. Obama is doing a GREAT job. DD
