White House: GM, Chrysler Not Viable

Obama To Announce Industry Restructuring; Wagoner Out At GM, Majority Of Board May Follow

(CBS/AP)  The White House says neither General Motors nor Chrysler submitted acceptable plans to receive more bailout money, setting the stage for a crisis in Detroit and putting in motion what could be the final two months of two American auto giants.

President Barack Obama and his top advisers have determined that neither company is viable and that taxpayers will not spend untold billions more to keep the pair of automakers open forever. In a last-ditch effort, the administration gave each company a brief deadline to try one last time to convince Washington it is worth saving, said senior administration officials who spoke on the condition of anonymity to more bluntly discuss the decision.

Mr. Obama was set to make the announcement at 11 a.m. Monday in the White House's foyer.

In an interview with CBS' Face The Nation broadcast Sunday, Mr. Obama said the companies must do more to receive additional financial aid from the government.

"We think we can have a successful U.S. auto industry. But it's got to be one that's realistically designed to weather this storm and to emerge - at the other end - much more lean, mean and competitive than it currently is," Mr. Obama told Face The Nation host Bob Schieffer.

On Monday, Schieffer told CBS' The Early Show that the president took these actions "to let people know that he takes seriously their concerns" over the auto industry.

Frustrated administration officials said Chrysler cannot function as an independent company under its current plan. They have given Chrysler a 30-day window to complete a proposed partnership with Italian automaker Fiat SpA, and will offer up to $6 billion to the companies if they can negotiate a deal before time runs out.

If a Chrysler-Fiat union cannot be completed, Washington plans to walk away, leave Chrysler destined for a complete sell-off. No other money is available.

Shawn Morgan, a Chrysler spokeswoman, said the company wants to work with the Treasury Department and Mr. Obama's auto task force but declined to comment on the White House's plans.

"With the administration's announcement on the restructuring of the automotive industry imminent, it would be inappropriate to comment on speculation," Morgan said in a statement early Monday morning.
Watch President Obama's interview on Face The Nation

---

For GM, the administration offered 60 days of operating money to restructure. A frantic top-to-bottom effort began Sunday after CEO Rick Wagoner resigned under pressure from the White House.

Senior Obama administration officials told CBS News that Wagoner was asked to resign because General Motors needed a fresh start, and a change in leadership was required for GM to have a clean slate.

The book on Wagoner, according to several auto industry experts, was that he knew how to make cars but not how to crack heads with the union, reports CBS News correspondent Tony Guida.

One expert told Guida that Wagoner, as recently as January, did not agree that the UAW contract was too rich. And it appears that with this move, Obama is sending a message to the auto industry and the union: "If you want more taxpayer money, get serious about cutting costs."

Look at the current predicaments of GM and Chrysler this way: both companies are in a high-stakes poker game and both are down to their final stack of chips - borrowed chips - more than $17 billion worth of taxpayer money, handed over by the Bush administration in return for fundamental restructuring.

"GM and Chrysler were required to turn their debt into equity and reduce labor costs," says University of Maryland economist Peter Morici.

The move to push Wagoner out at GM raises many questions tonight, Guida reports, not the least of which is why?

After all, the administration is bailing out the banks with many times the billions that the auto industry is asking for but no bank CEOs have been forced to quit.

Kent Kresa, Former Chairman and CEO of Northrop Grumman and a senior advisor to the Carlyle Group, will serve as interim Chairman, and current GM President Fritz Henderson will serve as CEO, the administration said.

One official said a majority of the GM board was expected to step down.

Under the existing loan agreements, approved by the Bush administration, there was a requirement that the Obama administration make a determination on the viability of the companies by March 31. On Feb. 17, both companies made viability submissions, and requested additional aid.

Obama advisers saw public outrage come to an ugly head in recent weeks, as populist anger escalated over bonuses paid to American International Group executives. They realized Americans are frustrated with the economy and its business leaders; they also said they would not invest one dollar more than was necessary to keep the companies alive and would walk away if it looked impossible.

Officials said GM had not made good on promises made in exchange for $13.4 billion in government loans, although there are no plans to call in those loans.

Administration officials still believe GM's chances are good, given its global brand and its research potential. Officials say they are confident GM can put together a plan that will keep production lines moving in the coming years. They planned to send a team to Detroit to help with that restructuring.

Chrysler, meanwhile, has survived on $4 billion in federal aid during this economic downturn and the worst decline in auto sales in 27 years.

In progress reports filed with the government in February, GM asked for $16.6 billion more and Chrysler wanted $5 billion more. The White House balked and instead started a countdown clock.

Administration officials acknowledged the short turnaround time was harsh; one described it as a nanosecond in a business cycle.

Two people familiar with the plan said officials will demand further sacrifices from the automakers and bankruptcy would still be possible if the automakers failed to restructure. Those officials spoke on condition of anonymity because they were not authorized to make details public.

Administration officials said they hoped large-scale bankruptcy could be avoided, especially if it might be stretched over many years. Any efforts to use the bankruptcy courts would have to be targeted and aggressive and must not prolong a restructuring process, they said.

GM and Chrysler, which employ about 140,000 workers in the U.S., faced a Tuesday deadline to submit completed restructuring plans, but neither company was expected to finish its work. The White House's plan renders them, as well as a potential discussion about the companies' borrowed money, moot.

GM owes roughly $28 billion to bondholders. Chrysler owes about $7 billion in first- and second-term debt, mainly to banks. GM owes about $20 billion to its retiree health care trust, while Chrysler owes $10.6 billion.

An exasperated administration official noted that the companies had not done enough to reduce debt; in some cases, it actually increased during this restructuring and review process.

In February, GM said it intended to cut 47,000 jobs around the globe, or almost 20 percent of its work force, close hundreds of dealerships and focus on four core brands - Chevrolet, Cadillac, GMC and Buick.

In an effort to bolster consumer confidence, Mr. Obama planned to announce government backing of warranties for GM and Chrysler vehicles. An administration official said there is no price tag yet associated with that promise.

Aides note that Mr. Obama inherited the auto mess from his predecessor, President George W. Bush.

Under the terms of a loan agreement reached during the last administration, GM and Chrysler are pushing the United Auto Workers to accept shares of stock in exchange for half of the payments into a union-run trust fund for retiree health care. They also want labor costs from the union to be competitive with Japanese automakers with U.S. operations.

Little progress has been made between the companies and the union.

[sndkzyaa]

Geithner didn't work at AIG.
He worked at the NY federal reserve.
Posted by hungry1968-15 at 8:12 PM : Mar 29, 2009

Geithner was deeply involved in the AIG bailout of last year.

Now he's the head of the Treasury, and AIG isn't getting beat up as bad as GM is right now.

In fact, AIG is getting the royal treatment.

Sounds a little too much like there was some deal.

My question is, if Obama is asking for GM's CEO to resign, why isn't he asking Burris, Holder, and Geithner to resign?

[sndkzyaa]

Reagans policies have done more harm to the USA than any president since Republicon Hoover!
Posted by neoconism at 7:26 PM : Mar 29, 2009

I don't know if you realize this, but there have been four presidents since Reagan.

That was 20 years ago. If his policies are still in place, it's because all the other presidents since then chose to keep them instead of changing them.

[sndkzyaa]

We actually agree on something!!
Posted by hungry1968-15 at 7:31 PM : Mar 29, 2009

Scary, isn't it? I think this is the second time in the past week.

We also agree that both political parties are to blame.

And a while ago, we agreed that free trade globalization is a bad thing, and it's wrecking our economy.

This is starting to look like a camapign platform.

We can call it the "Everybody agrees at least with this much" party.

[sndkzyaa]

Guess what. GM isn't the only company that makes cars.

If GM goes under, other companies will keep making cars.

And the other companies will have to hire more workers if they have to make more cars.

And they'd probably do a much better job, so we'll all be better off without GM.

[rrozsa]

No krap, but since you came in so late to the conversation and had nothing to contribute other than being a smartasss when I wasn't using seeing something as my ONLY proof, I didn't think your comments were worth much of my attention. I hope that clarifies why I blew off your question.
Posted by slownewsday02 at 2:29 PM : Mar 30, 2009

===================

First of all, I've been reading both sides of your discussion with great interest, all day, and have had nothing to contribute until then. I was curious to see what your answer was. Pardon me for interrupting your private chat.

[rrozsa]

Should we then allow abortions of one year olds, because a mother in distress might kill her baby or might abuse it? So it is better to kill it?
Posted by mortar29 at 2:16 PM : Mar 30, 2009

======================

I believe killing an unborn fetus is as morally wrong as killing an infant. On that we do agree. Obviously the law disagrees with me; and abortion is illegal, while infanticide is not. But I've seen too many pictures of desperate young mothers lying in a pool of their own blood, because they felt they had no alternative. You and I both know that once the baby is born, a young mother has MANY alternatives, such as adoption, etc.

[rrozsa]

How about the wind? Got any pictures of that?
Posted by rrozsa

Yep. Thanks for asking.
Posted by slownewsday02 at 2:15 PM : Mar 30, 2009

==================

I would love to see that, given that the wind is invisible. All you can see is evidence of the wind, not the wind itself.

[rrozsa]

Posted by mortar29

Well, someone COULD have taken a picture of him. Therein lies the difference.
Posted by slownewsday02 at 1:55 PM : Mar 30, 2009

=================

How about the wind? Got any pictures of that?

[rrozsa]

OK, I'm a case in point, slownews, rowdy and TJ. Tell me, am I conservative or liberal?

Like many other libertarians, I believe in small government, personal responsibility, states rights over federal, and a strong military.

I also believe that while abortion is morally wrong, we need it legalized because young desperate women will use coat hangers, and legalized abortion at least will give us some control over this tragedy. In like manner, I believe homosexual unions are not "marriage", but that gays should be allowed to have civil unions which give them the rights of married people in the eyes of the law. I also believe recreational drugs should be legalized so we can tax them and take the money out of the hands of criminals and into the economy.

In short, I consider myself a fixcal conservative and a social moderate/liberal. Which side wants to claim me?

[aziridine]

Personally, I think Obama is bluffing in order to get a satisfactory union concessions. My hope is that his is a prelude to a total and vigorous a$$ f*kking of the UAW. After years of sucking the car companies dry it would be lovely to see those greedy union workers scrambling for the few minimum wage McDonalds and Walmart jobs left in Michigan.

I rarely compliment Obama, but if he puts the UAW out of business, I will....