BREAKING: Obama rejects GM and Chrysler’s viability plans

President Barack has just wrapped up his press conference on the government’s decision on the viability plans submitted by GM and Chrysler on Feb 17th after both automakers received $17.4 billion.

“Neither goes far enough to warrant the substantial new investments that these companies are requesting,” Obama said. “They must produce plans that would give the American people confidence in their long-term prospects for success.”

Obama warned that the Michigan automakers may be forced into a quick bankruptcy. What do we mean by a “quick bankruptcy?” Obama’s auto task force said that a bankruptcy filing may possibly the “best chance of success” for GM and Chrysler. They said that the bankruptcy could last for as little as 30 days.

“What I am not talking about is a process where a company is broken up, sold off, and no longer exists,” Obama said. “And what I am not talking about is having a company stuck in court for years, unable to get out.”

The government will be unveiling a new program that backs warrantees of GM and Chrysler vehicles if either automaker fails.

For Chrysler, the government will provide $6 billion if the proposed partnership between it and Fiat is finalized. For GM, the government said it will continue to fund operations for the next 60 days while it develops another restructuring plan.

You can read statements by both automakers on President Barack Obama’s speech below.

 

General Motor’s Response:

 

GM Statement on Auto Industry Restructuring

Today”s announcement by President Obama begins a new era for the U.S. auto industry. It also marks a defining moment in the history of General Motors.

The U.S. Treasury will provide working capital financing for GM for 60 days while GM completes a more accelerated and aggressive restructuring to put the company on sound long-term financial footing. We understand the historic opportunity this presents, and we are fully committed to successfully completing the reinvention of GM.

As President Obama said today, the success of this reinvention is vital for GM, for the U.S. and global economies, and for the millions of employees, suppliers, dealers, retirees and others who depend on the company.

During the next 60 days, GM will address the tough issues to improve the long-term viability of the company, including the restructuring of the financial obligations to the bond holders, unions and other stakeholders. Our strong preference is to complete this restructuring out of court. However, GM will take whatever steps are necessary to successfully restructure the company, which could include a court-supervised process.

The men and women of GM, including our dealers, suppliers and other key partners, know what we must do to accomplish this task. We are fully committed to making this successful. We owe that to the GM community, to our customers, and to the U.S. taxpayers, who are providing support during this exceptionally challenging time.

Quotes attributable to Fritz Henderson, GM CEO

“The U.S. Treasury has said that it strongly believes that a substantial restructuring will lead to a viable GM. 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.”

“We have significant challenges ahead of us, and a very tight timeline. I am confident that the GM team will succeed, and that a stronger, healthier GM will play an important role in revitalizing America”s economy and re-establishing its technology leadership and energy independence.”

“The administration has made it clear that it expects GM to expand and accelerate its restructuring efforts. I want the American people to know that we understand and accept this guidance. The road is tough, but the ultimate goal ““ a leaner, stronger, viable GM ““ is one we share.”

General Motors Corp. (NYSE: GM), one of the world”s largest automakers, was founded in 1908, and today manufactures cars and trucks in 34 countries. With its global headquarters in Detroit, GM employs 243,000 people in every major region of the world, and sells and services vehicles in some 140 countries. In 2008, GM sold 8.35 million cars and trucks globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Hummer, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling. GM”s largest national market is the United States, followed by China, Brazil, the United Kingdom, Canada, Russia and Germany. GM”s OnStar subsidiary is the industry leader in vehicle safety, security and information services. More information on GM can be found at www.gm.com.

GM is the majority shareholder in GM Daewoo Auto & Technology Co. of South Korea, and has product, powertrain and purchasing collaborations with Suzuki Motor Corp. and Isuzu Motors Ltd. of Japan. GM also has advanced technology collaborations with Chrysler LLC, Daimler AG, BMW AG and Toyota Motor Corp. and vehicle manufacturing ventures with several automakers around the world, including Toyota, Suzuki, Shanghai Automotive Industry Corp. of China, AVTOVAZ of Russia and Renault SA of France.

Genuine GM Parts and accessories are sold under the GM, GM Performance Parts, GM Goodwrench and ACDelco brands through GM Service and Parts Operations, which supplies GM dealerships and distributors worldwide. GM engines and transmissions are marketed through GM Powertrain.

 

Chrysler’s Response:

 

Chrysler LLC Statement in Response to the Announcement by the Administration, U.S. Treasury and President”s Auto Task Force attributed to Chrysler LLC Chairman and CEO, Bob Nardelli

Auburn Hills, Mich., Mar 30, 2009  –  Today marks an important milestone for Chrysler LLC. We are encouraged by the commitments of the Administration, U.S. Treasury and President”s Auto Task Force to the American automobile industry and Chrysler”s viability, with a Fiat alliance.

We are pleased that Chrysler, Fiat and Cerberus have reached agreement on a framework of a global alliance, supported by the U.S. Treasury. Chrysler has consistently said that the alliance with Fiat enhances its business model that expands its global competitiveness. We appreciate the willingness of the Task Force, along with industry and financial experts, to consult closely with us in order to achieve this significant step.

By providing Chrysler with product and platforms, technology cooperation and global distribution, Fiat strengthens Chrysler”s ability to create and preserve U.S. jobs; gives U.S. consumers more choices for environmentally advanced vehicles; gives its dealers more of the products they need to be successful; helps stabilize the supplier base; and allows Chrysler to pay back government loans sooner.

Chrysler has had a series of very constructive discussions since our plan was submitted February 17, including weekly face-to-face meetings with the Task Force. We have been impressed by their speed, diligence, good faith and strong grasp of the difficult issues our industry faces in this financial crisis. This is evidenced by the U.S. government”s initiatives to support consumer warranties and suppliers, as well as their appointment of Dr. Edward Montgomery, Director of Auto Recovery.

I want to personally assure all of our customers, dealers, suppliers and employees that Chrysler will operate “˜business as usual” over the next 30 days. While we recognize that we still have substantial hurdles to resolve, Chrysler is committed to working closely with Fiat, the Administration, U.S. Treasury and the Task Force to secure the support of necessary stakeholders. If successful, the government will consider investing up to the additional $6 billion requested by Chrysler to help this partnership succeed. 

– By: Omar Rana

Source: Detroit News