The Politics Of The Auto Plan

President Barack Obama Monday gave GM 60 days in which to reorganize its business plan under new leadership before rendering a final judgment on additional taxpayer aid for the automaker. He also gave Chrysler 30 days to finalize a deal with Fiat with federal help.

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MICHELE NORRIS, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Michele Norris.

MELISSA BLOCK, host:

And I'm Melissa Block. If General Motors is to survive as an automaker, it's got to change a lot more than it's been willing to change up to now. That was the tough love message from President Obama today after he and his Auto Task Force ousted the company's CEO and rejected its restructuring plans. The White House wants GM to slash costs and restructure its debt even more than it already has, all before it gets additional billions in federal aid. GM got 60 days to come back with such a package. Chrysler got even less - just 30 days to wrap up its merger with Italian-based carmaker Fiat. NPR's Don Gonyea reports.

DON GONYEA: By the time the president spoke at the White House this morning, his decision had already been leaked to the media. Some Wall Street analysts and autoworkers alike heard a death knell in the rejection of reorganization plans submitted by the two companies, both already on life support. Still, some saw a glimmer of hope, figuring the news from the president could have been worse. At least the president seemed determined to preserve the once-proud carmakers of Detroit in some form.

President BARACK OBAMA: We cannot and must not and we will not let our auto industry simply vanish. This industry is like no other. It's an emblem of the American spirit, a once-and-future symbol of America's success. It's what helped build the middle class and sustained it throughout the 20th century.

GONYEA: But he also said that taxpayers cannot keep GM and Chrysler afloat without some assurance that success is likely, and so far, the president said, the automakers have not done enough to demonstrate that. He said he was given each, quote, "a limited, additional period of time" to come up with something to justify the $16 billion more GM says it needs and the $6 billion Chrysler has requested.

Pres. OBAMA: Now, what we're asking for is difficult. It will require hard choices by companies.

GONYEA: He said workers who have already made painful concessions will have to make more. And the president said creditors must stop holding out for better terms that might come with successive government bailouts. And even though he had just announced the ouster of GM CEO Rick Wagoner and the offer to guarantee the warrantees on GM cars, Mr. Obama insisted his latest moves did not amount to a takeover.

Pres. OBAMA: Let me be clear. The United States government has no interest in running GM. We have no intention of running GM. What we are interested in is giving GM an opportunity to finally make those much-needed changes that will let them emerge from this crises a stronger and more competitive company.

GONYEA: Wagoner's removal as CEO was the most unexpected element of what the White House has done. That news broke Sunday night. The president said GM needed a new vision, but there was also a sense that the White House needed something to show an American public growing weary of taxpayer bailouts. On NBC this morning, Michigan Governor Jennifer Granholm had this reaction to the news.

Governor JENNIFER GRANHOLM (Democrat, Michigan): I know that Rick Wagoner has worked for that company for 31 years, and he is a good man. He clearly is a sacrificial lamb.

GONYEA: The Wagoner firing made the day's decision reverberate through this and other industries, but it leaves many unanswered questions. The president again raised the specter of bankruptcy for GM and Chrysler. He said that specter shouldn't scare buyers away from GM or Chrysler products, given the new government guarantee for their warrantees. But Michigan Congressman Sander Levin, who's district is full of car plants, suppliers and lots of people dependent on the industry, says he hopes bankruptcy is still just a threat and not the underlying strategy.

Representative SANDER LEVIN (Democrat, Michigan): There are simply so many uncertainties about a bankruptcy procedure. I hope the bondholders and others got the message, look. Bankruptcy would wipe you out.

GONYEA: Today's White House action was less than Levin was hoping for.

Rep. LEVIN: It's a lifeline, and I hope it's more than a lifeline.

GONYEA: Levin says it increases the pressure on everyone involved with the industry. Long-time Michigan political analyst Bill Belanger puts it even more bluntly.

Mr. BILL BELANGER (Political Analyst): We've been whopped upside the head here in Michigan and told this may be the last chance you have. You've got to get it right this time. If you don't have it right in 60 days, forget about any more edicts from the federal government. You're going to be swimming on your own, and you may decide that's a heck of a lot worse than anything President Obama does to you.

GONYEA: Don Gonyea, NPR News, Washington.

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Obama Sets Deadlines For GM, Chrysler Overhauls

Rick Wagoner, seen in February, is stepping down as GM chief. i i

Rick Wagoner, seen in February, is stepping down as chief of General Motors at the government's request. Bill Pugliano/Getty Images hide caption

itoggle caption Bill Pugliano/Getty Images
Rick Wagoner, seen in February, is stepping down as GM chief.

Rick Wagoner, seen in February, is stepping down as chief of General Motors at the government's request.

Bill Pugliano/Getty Images

President Obama took a hard line Monday with General Motors and Chrysler, setting tough conditions for another government bailout and raising the possibility of a structured bankruptcy to get the companies on the road to profitability.

Obama said his auto task force found that the companies' plans for restructuring were insufficient to warrant a bigger financial commitment by taxpayers. He also said that GM would be under new leadership as the company struggles to redefine itself.

"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," Obama said.

But the president also threw the automakers a lifeline, announcing a raft of incentives to help GM and Chrysler sell cars. They include government-backed warranties, tax incentives to car buyers, the release of funds to buy cars for the government's fleet and a possible "scrappage incentive" trade-in program for less reliable older cars.

In a statement, former GM chairman and CEO Rick Wagoner said administration officials asked him to step aside Friday when he was in Washington for a meeting.

Fritz Henderson, GM's president and chief operating officer, will lead restructuring efforts as the company's new CEO. Wagoner said Henderson was a good choice for the job.

"GM is a great company with a storied history," Wagoner said in his statement. "Ignore the doubters, because I know it is also a company with a great future."

In December, the Bush administration approved $17 billion in federal funds to help GM and Chrysler survive. But continued government assistance was contingent upon the companies submitting viable restructuring plans to the Obama administration.

Last week, Obama said carmakers sell 14 million vehicles in an average year, but that number has dropped to 9 million.

The president gave GM 60 days to win concessions from unions, creditors and others and consolidate unprofitable brands. Obama said the administration would provide both working capital and assistance during the 60-day window.

In the case of Chrysler, Obama said the company must have a partner to stay in business. He gave Chrysler 30 days to reach a merger agreement with Fiat, which has agreed to build fuel-efficient cars in the United States and repay U.S. taxpayers for new investments made before Fiat assumes majority ownership, he said.

If Fiat and Chrysler strike a bargain, the government may consider an additional loan of up to $6 billion, Obama said. If the companies do not agree to a partnership, the government would not continue to invest in Chrysler, leaving the door open to bankruptcy.

"While Chrysler and GM are very different companies with very different paths forward, both need a fresh start to implement the restructuring plans they develop. That may mean using our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger," Obama said.

Henderson said GM will work hard to meet Obama's deadline.

"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."

The recession has hit the auto industry hard. In Michigan, 1 in 10 residents has been thrown out of work, as manufacturers, dealers and parts suppliers shed more than 400,000 jobs, Obama said.

And the president said more sacrifices would be needed if the companies are to become viable.

But Michigan Rep. Thaddeus McCotter, a Republican, said the companies' initial plans cut 50,000 jobs. He said he's worried about what else can be sacrificed.

McCotter said he is concerned about how retirees' pensions and benefits will fare if the automakers head into bankruptcy.

Contributing: NPR staff and member station WDET in Detroit.

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