Obama Lays Out Plan For Detroit's Survival
President Barack Obama said Monday that neither General Motors nor Chrysler has proposed sweeping enough changes to justify further large federal bailouts, and demanded "painful concessions" from creditors, unions and others as their price for survival.
Mr. Obama also raised the possibility of a controlled bankruptcy to help either or both "restructure quickly and emerge stronger" - uttering the term that industry and union officials have warned repeatedly could lead to the collapse of an entire domestic industry.
"We cannot, we must not, and we will not let our auto industry simply vanish. This industry is, like no other, an emblem of the American spirit; a once and future symbol of America's success," Mr. Obama said in remarks made from the White House.
He quickly added: "But we also cannot continue to excuse poor decisions. And we cannot make the survival of our auto industry dependent on an unending flow of tax dollars. These companies - and this industry - must ultimately stand on their own, not as wards of the state."
Also, Mr. Obama said the IRS will start notifying consumers who purchased cars after Feb. 16 that they can deduct the cost of any sales and excise taxes. The program would remain in effect till year's end.
Mr. Obama says he wants to work with Congress to use parts of the economic stimulus package to fund a program that would allow consumers to get a "generous credit" when they replace an older, less fuel-efficient car and buy a new, cleaner car.
With his words, Mr. Obama underscored the extent to which the government is now dictating terms to two of the country's iconic corporations - forcing the departure of Rick Wagoner as CEO of General Motors, and bluntly warning it may pull the plug on either or both Michigan-based companies.
"Our auto industry is not moving in the right direction fast enough to succeed," Mr. Obama said.
Some analysts say the White House now has unprecedented control over a major industry, reports CBS News Chief White House Correspondent Chip Reid.
"They are now relying on the government to bail them out and when that happens, guess what, you gotta do what the government wants!" says auto industry analyst John McElroy.
In Congress, even many Michigan members reluctantly support the president's "tough love" approach, Reid reports.
Some, though, complained about a double standard - one for auto executives another for CEOs of the major banks.
"The president had all the CEOs of the financial institutions pledging to work them, hosting them at the White House and at the same time, Mr. Wagoner goes," said Rep. Thaddeus McCotter (R - Mich.)
GM and Chrysler both employ thousands in Ohio, the No. 2 state for vehicle production after Michigan.
Fears of an automaker bankruptcy pushed stocks down more than 200 points in early trading on Wall Street.
The Bush administration late last year approved $17 billion in federal funds to help GM and Chrysler survive. It also demanded both companies submit restructuring plans that the Obama administration would review.
Even as he pronounced their effort unsatisfactory, the president said the administration will offer General Motors "adequate working capital" over the next 60 days to produce a reorganization plan acceptable to the administration.
He said Chrysler's situation is more perilous, and the government will give the company 30 days to overcome hurdles to a merger with Fiat, the Italian automaker. If they are successful "we will consider lending up to $6 billion to help their plan succeed," he said.
Mr. Obama spoke at the White House with the Big 3 standing at yet another crossroads. As the president noted, the industry has shed over 400,000 jobs in the past year as the recession took hold. Officials announced last week bailout funds would be made available to companies that supply the automakers, an attempt to keep them afloat.
He also said some of the industry's progress has scarcely been noticed. He mentioned that the North American car of the year in 2008 was produced by GM.
"Let me be clear: the United States government has no interest or intention of running GM," he said.
But that was at the same time he was formally announcing the departure of Wagoner, whom administration officials forced into retirement on Sunday in preparation for the president's remarks.
"This is not meant as a criticism of Mr. Wagoner, who has devoted his life to this company; rather it's a recognition that it will take a new vision and new direction to create the GM of the future."
In a statement released Monday, Wagoner said simply of his meeting with the Obama administration: "They requested that I 'step aside' as CEO of GM, and so I have."
Other changes at GM include new directors on its board. Fritz Henderson, GM's president and chief operating officer, became the new CEO. Board member Kent Kresa, the former chairman and CEO of defense contractor Northrop Grumman Corp., was named interim chairman of the GM board.
Detroit was in shock Monday as GM workers worried about their jobs, reports CBS News Business Correspondent Anthony Mason.
"Where you gonna get a job when there's 12 percent unemployment?" asked Scott Smith.
GM retirees like Henry Winston Moore, Jr., who spent 32 years with the company, were worried about their futures as well, Mason reports.
"I need those people who are in there now at $14, $18 an hour to be able to still work, hopefully so I can still receive a pension every month," Moore said.
The Obama move comes amid public outrage over bonuses paid to business leaders and American International Group executives - set against a severely ailing economy.
CBS News poll from March 17, Americans have little sympathy for U.S. automakers facing financial difficulties. Just 18 percent think the government should provide them with additional financial assistance, and 76 percent think the government should not.
Also, the public blames the automakers themselves for their current problems - by a big margin. Sixty-three percent say the problems facing the big three auto companies are mostly the result of management strategies and decisions (up from 56 percent last December), while only 24 percent say the problems are a result of economic conditions beyond the automakers' control.
GM failed to make good on promises made in exchange for $13.4 billion in government loans. 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.
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.
GM and Chrysler employ about 140,000 workers in the U.S. 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.
© 2009 CBS Interactive Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report. Mr. Obama also raised the possibility of a controlled bankruptcy to help either or both "restructure quickly and emerge stronger" - uttering the term that industry and union officials have warned repeatedly could lead to the collapse of an entire domestic industry.
"We cannot, we must not, and we will not let our auto industry simply vanish. This industry is, like no other, an emblem of the American spirit; a once and future symbol of America's success," Mr. Obama said in remarks made from the White House.
He quickly added: "But we also cannot continue to excuse poor decisions. And we cannot make the survival of our auto industry dependent on an unending flow of tax dollars. These companies - and this industry - must ultimately stand on their own, not as wards of the state."
Also, Mr. Obama said the IRS will start notifying consumers who purchased cars after Feb. 16 that they can deduct the cost of any sales and excise taxes. The program would remain in effect till year's end.
Mr. Obama says he wants to work with Congress to use parts of the economic stimulus package to fund a program that would allow consumers to get a "generous credit" when they replace an older, less fuel-efficient car and buy a new, cleaner car.
With his words, Mr. Obama underscored the extent to which the government is now dictating terms to two of the country's iconic corporations - forcing the departure of Rick Wagoner as CEO of General Motors, and bluntly warning it may pull the plug on either or both Michigan-based companies.
"Our auto industry is not moving in the right direction fast enough to succeed," Mr. Obama said.
Some analysts say the White House now has unprecedented control over a major industry, reports CBS News Chief White House Correspondent Chip Reid.
"They are now relying on the government to bail them out and when that happens, guess what, you gotta do what the government wants!" says auto industry analyst John McElroy.
In Congress, even many Michigan members reluctantly support the president's "tough love" approach, Reid reports.
Some, though, complained about a double standard - one for auto executives another for CEOs of the major banks.
"The president had all the CEOs of the financial institutions pledging to work them, hosting them at the White House and at the same time, Mr. Wagoner goes," said Rep. Thaddeus McCotter (R - Mich.)
GM and Chrysler both employ thousands in Ohio, the No. 2 state for vehicle production after Michigan.
Fears of an automaker bankruptcy pushed stocks down more than 200 points in early trading on Wall Street.
The Bush administration late last year approved $17 billion in federal funds to help GM and Chrysler survive. It also demanded both companies submit restructuring plans that the Obama administration would review.
Even as he pronounced their effort unsatisfactory, the president said the administration will offer General Motors "adequate working capital" over the next 60 days to produce a reorganization plan acceptable to the administration.
He said Chrysler's situation is more perilous, and the government will give the company 30 days to overcome hurdles to a merger with Fiat, the Italian automaker. If they are successful "we will consider lending up to $6 billion to help their plan succeed," he said.
Mr. Obama spoke at the White House with the Big 3 standing at yet another crossroads. As the president noted, the industry has shed over 400,000 jobs in the past year as the recession took hold. Officials announced last week bailout funds would be made available to companies that supply the automakers, an attempt to keep them afloat.
Mr. Obama said he is committed to the survival of an auto industry - on terms that will allow it to compete internationally.
He also said some of the industry's progress has scarcely been noticed. He mentioned that the North American car of the year in 2008 was produced by GM.
"Let me be clear: the United States government has no interest or intention of running GM," he said.
But that was at the same time he was formally announcing the departure of Wagoner, whom administration officials forced into retirement on Sunday in preparation for the president's remarks.
"This is not meant as a criticism of Mr. Wagoner, who has devoted his life to this company; rather it's a recognition that it will take a new vision and new direction to create the GM of the future."
In a statement released Monday, Wagoner said simply of his meeting with the Obama administration: "They requested that I 'step aside' as CEO of GM, and so I have."
Other changes at GM include new directors on its board. Fritz Henderson, GM's president and chief operating officer, became the new CEO. Board member Kent Kresa, the former chairman and CEO of defense contractor Northrop Grumman Corp., was named interim chairman of the GM board.
"The board has recognized for some time that the company's restructuring will likely cause a significant change in the stockholders of the company and create the need for new directors with additional skills and experience," Kresa said in a written statement.Read Katie Couric's interview with Fritz Henderson
Detroit was in shock Monday as GM workers worried about their jobs, reports CBS News Business Correspondent Anthony Mason.
"Where you gonna get a job when there's 12 percent unemployment?" asked Scott Smith.
GM retirees like Henry Winston Moore, Jr., who spent 32 years with the company, were worried about their futures as well, Mason reports.
"I need those people who are in there now at $14, $18 an hour to be able to still work, hopefully so I can still receive a pension every month," Moore said.
The Obama move comes amid public outrage over bonuses paid to business leaders and American International Group executives - set against a severely ailing economy.
CBS News poll from March 17, Americans have little sympathy for U.S. automakers facing financial difficulties. Just 18 percent think the government should provide them with additional financial assistance, and 76 percent think the government should not.
Also, the public blames the automakers themselves for their current problems - by a big margin. Sixty-three percent say the problems facing the big three auto companies are mostly the result of management strategies and decisions (up from 56 percent last December), while only 24 percent say the problems are a result of economic conditions beyond the automakers' control.
GM failed to make good on promises made in exchange for $13.4 billion in government loans. 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.
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.
GM and Chrysler employ about 140,000 workers in the U.S. 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.
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FASCISM ?/?f???z?m/ Show Spelled Pronunciation [fash-iz-uhm] Show IPA
?noun 1. (sometimes initial capital letter) a governmental system led by a dictator having complete power, forcibly suppressing opposition and criticism, regimenting all industry, commerce, etc., and emphasizing an aggressive nationalism and often racism.
2. (sometimes initial capital letter) the philosophy, principles, or methods of fascism.
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This president is already a bigger joke than G.W.
Our tax dollars rewarding incompetent exes......TIME FOR A TAX REVOT
Here comes the tough decisions and it's coming from "their" election choice, Prez Obama. Whew, what a bitter pill to swallow because they thought they were going to get away with the same old/same old under Obama, because you know McCain was going to take it all away, right? It's funny how McCain refused to lie to these people and promise them something that was not feasible, Barack alluded to being their savior and it ends up being him to put their heads on the chopping block.
I don't want to see GM fail as I live in Michigan, but people have been blind and not seen the writing on the wall (the UAW). They thought a "party" would protect them, but reality needs them to be competitive to survive and "no" political party would ever agree to the current "plan" as feasible.
Also, get rid of the heads of the UAW, they have sucked GM dry and are the "real" leeches in this fiasco because they fed their members a false reality and made money off the backs of their members.
Why there's talk of the News Media needing to be bailed out, but that's been kept quiet. Gas & Oil are up to their old tricks of raising prices along with food, etc. The real scheme is to get the people pay more for less goods. Where is this affordable energy & food?
The EPA has released an endangerment finding on carbon dioxide. The finding will allow the gas to be regulated under the Clean Air Act, something the Act was not intended to do when it was enacted over 30 years ago. Aggressive cap-and-trade measures are being debated on Capitol Hill and, if enacted, are rumored to rake in trillions of dollars for the federal government and raise the cost of living for Americans by thousands of dollars.
Dan Simmons, the director of state affairs at the Institute for Energy Research, calls cap-and-trade the largest backdoor tax in U.S. history.
"In the budget it said $646 billion. They then are telling people on Capitol Hill that it is going to be $1.3 [trillion] to $1.9 trillion," he points out. "That will make it the largest tax increase of all time of all American history and probably all world history." The rest of the story on how these Einsteins of our time are planning on paying off their deficits. The GW Agenda is the priority on Capital Hill these days.
He is well aware that this country is split basically 50/50 on every issue/situation imaginable - you can't do a good job AND be overwhemingly popular - but he understands what he was elected to do and he is doing it. It may not all be right and rosey but at least he has an action plan and isn't afraid to use it.
I think the Bush was the last "Normal" for this country.
If what we are seeing continues, we will one day praise Bush and the Republicans.
People haven't stopped wanting to replace ageing vehicles.
They do not want to take a hickey on their credit should their employment go away.
Hyundai's sales figures confirm such to be the case.
Wagner was part of the problem, rather than showing he could be part of the solution.
He was given 90 days and 16 billion to come up with a worthwhile recovery plan.
He could not.
Someone else with a foot in the real world will have to do so.
Posted by Thiefofhearts1 at 8:14 PM
Why would they fix it? They made it this way for a reason. To stop you and others from doing what you were doing before. It's working, so it's unlikely they will go back to the way it was before.