GM CEO Forced To Resign; Obama Rejects Bailout… For Now
General Motors and Chrysler seem to be running out of support in DC. In today’s speech, President Obama questioned the viability of both companies, saying more concessions were needed from stakeholders, while still emphasizing that he was “absolutely committed” to the survival of our domestic auto industry.
President Barack Obama refused further long-term federal bailouts for General Motors and Chrysler, saying more concessions were needed from unions, creditors and others before they could be approved. He raised the possibility Monday of controlled bankruptcy for one or both of the beleaguered auto giant.
In a move designed to reassure the US consumer, President Obama also announced plans to immediately begin backing new car warranties, making it safe to purchase a GM or Chrysler vehicle without fear of losing one’s service.
President Obama’s auto task force determined that General Motors has not presented a viable plan that would succeed. They are willing to give GM adequate working capital for 60 days to develop a more aggressive restructuring plan and have already pulled some strings for the ouster of GM’s top man:
In an extraordinary move, the administration forced the departure of Rick Wagoner as CEO of General Motors over the weekend, and implicit in Obama’s remarks was that the government holds the ability to pull the plug on that company or Chrysler.
Current president Fritz Henderson will serve as chief executive, while Kent Kresa, a GM board member, will serve as interim chairman.
As for Chrysler, there’s not much support coming from Obama. The same task force has determined that the company is not viable as a standalone company. The government will not invest anymore taxpayer in the company if it does not complete a deal with Fiat, the Italian automaker. If they do so within the next 30 days, the administration will consider investing up to $6 billion to help the partnership between Chrysler and Fiat succeed.
Obama also raised the possibility that bankruptcy would be needed to revitalize the companies.
Looks like our government is in the business of picking winners and losers now. It’s not just about “too big to fail” anymore. Not a good sign for the future of the free markets.