Obama Is Stern With Automakers
Help Is Promised, but Without More Concessions and Cuts Bankruptcy May Loom
Tuesday, March 31, 2009
President Obama had a mixed message yesterday for the U.S. auto industry. He praised the struggling companies as "an emblem of the American spirit," but used his toughest language yet to demand that manufacturers, their creditors and their union cut costs further or face bankruptcy.
The president's threat dramatically ramps up the pressure on General Motors and Chrysler to trim their workforces and product lines, while pushing the union and creditors to agree to trade benefits and debt for company stock.
"If all of us are doing our part, then this restructuring, as painful as it will be in the short term, will mark not an end but a new beginning for a great American industry," Obama said in announcing his plans for the industry.
Should bankruptcy become necessary, Obama said, he would press for a process that would allow the companies to keep operating while clearing away the "old debts that are weighing them down." The companies would not be liquidated, he said.
But the stern words essentially kick-started efforts begun in December to get the companies and their stakeholders to reach agreements to streamline operations. None of the players want to declare bankruptcy, and its prospect is intended to compel all sides to make concessions.
Obama said Chrysler had 30 days to finalize an alliance with the Italian carmaker Fiat, reasoning that the American carmaker cannot be viable on its own. He gave GM about two months to streamline its operations and cut costs.
"Over the next 60 days, we will work around the clock, with all parties, to meet the aggressive requirements that have been set by the task force, and to make the fundamental and lasting changes necessary to reinvent GM for the long-term," GM's new chief executive Frederick A. Henderson said in a statement.
Henderson replaces former chief executive and company chairman G. Richard Wagoner Jr., who stepped down over the weekend at the behest of the White House. The ouster angered some at the company, who viewed it as a political move.
Yesterday on NBC's "Today Show," Michigan Gov. Jennifer Granholm (D) said Wagoner "clearly is a sacrificial lamb."
But Wagoner has accepted the decision, sources said.
"He's philosophical about it," said Bob Lutz, a vice chairman of GM. "He knows it's not a question of his having failed or not achieving much success. What people have not understood is that he has been in the process of saving GM for 10 years.
"But Rick understands that if a team keeps losing games that people will want to get rid of the coach. Is he happy? Hell no. But he understands."