Business News
US ultimatum for carmakers: restructure or face bankruptcy
Mar 30, 2009, 16:14 GMT
U.S. President Barack Obama (C), standing with Treasury Secretary Timothy Geithner (L), the new named director for auto recovery Edward Montgomery (2R), and Commerce Secretary Gary Locke, announces his plan to help the ailing automotive industry, at the White House in Washington, DC, USA on 30 March 2009. EPA/MATTHEW CAVANAUGH
Washington - The struggling US car industry will be given one last chance to restructure operations or lose the government's support, President Barack Obama announced Monday, declaring that General Motors Corp and Chrysler LLC had so far failed to prove that they can survive.
In a dramatic government intervention in the industry, Obama called for a series of changes to the car industry and forced out long-time GM chief executive Rick Wagoner, who will be replaced by the company's president Fritz Henderson.
GM, the largest US carmaker, will be given 60 days to reach new deals with labour unions, creditors and others to return to profitability.
But the White House determined that Chrysler is unable to survive on its own. The third-largest US carmaker will have 30 days to reach an agreement to partner with Italian firm Fiat Motors SA, which is considering taking a minority stake in the company.
Obama said he was committed to the survival of the US car industry, which has been brought to the brink of collapse in the current recession.
'We cannot, and must not and we will not let our auto industry simply vanish,' Obama said. 'But we cannot continue to excuse poor decisions. We cannot make the survival of our auto industry dependent on an unending flow of taxpayer dollars.'
US car sales plummeted more than 35 per cent over the last few months. The US government agreed in December to give GM 13.5 billion dollars and Chrysler 4 billion dollars in emergency loans, but set a deadline of Tuesday for both to complete their restructuring efforts. Ford Motor Co has not requested any government money.
Chrysler has asked for another 6 billion dollars in government loans and GM says it could need more than 20 billion dollars. But Obama said 'neither goes far enough to warrant the substantial new investments that these companies are requesting.'
Obama said the survival of the industry would require sacrifices from labour unions, creditors, dealers and others. The government would provide the two companies with enough capital to survive until the new deadlines, but he held out the possibility of a bankruptcy for one or both firms if they cannot restructure on their own.
GM confirmed Monday that it will be overhauling its management in the coming weeks and that Henderson will take over as chief executive from Wagoner, who has had a tumultuous nearly nine years at the helm of the company.
GM has lost more than 80 billion dollars in the last four years and in 2008 surrendered its title as the world's largest carmaker to Japanese rival Toyota Motor Corp.
Wagoner, 56, who joined GM back in 1977, said he was confident the company would survive the downturn without him.
'GM is a great company with a storied history,' Wagoner said in a statement. 'Ignore the doubters because I know it is also a company with a great future.'
A son of a GM sales manager, Henderson, 50, has held a number of positions with the company in nearly all continents.
As head of the GM's German subsidiary Opel from mid-2004 through the end of 2005, Henderson restructured the company, trimming around 10,000 jobs and bringing it back to profitability for the first time in nearly five years.
Yet Opel, too, is currently seeking government funds to survive the global recession. German Chancellor Angela Merkel has said she will only help once GM's restructuring plan is in place.
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Older Talkback
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spasshole is back
The only point he has to offer is the one on top of his head.
Hey, SP4 - how's it feel to have an adult for President, instead of a nincompoop?
duly reported. Hopefully removed soon.
Thank you, Mr. Editor
www.reuters.com/article/politicsNews/idUSTRE52U12D20090331
WASHINGTON (Reuters) - U.S. President Barack Obama benefits from a broadly held perception that others bear the bulk of responsibility for state of the U.S. economy, according to a Washington Post/ABC News poll published on Tuesday.
Asked who was responsible for the economic meltdown, 80 percent in the poll blamed banks, financial institutions and corporations. Some 70 percent also blamed consumers for taking on too much debt and the former Bush administration for lax regulation. Only 26 percent said the Obama administration was not doing enough to turn the situation around.
Two-thirds of respondents approve of the way Obama is handling the presidency, and 60 percent approve of the way he is handling the economy.
Sixty-four percent said were confident Obama's policies will improve the economy, down from 72 percent just before he took office in January.
Forty two percent said the country was now heading in the right direction, a five-year high. Late last year, when then-President George W. Bush was in its final months, as many as nine in 10 American said the country was heading in the wrong direction.
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(So much for idiot SP4's analysis of Bush - 9 out of 10 think that Bush led in the wrong direction. The other 10 percent were too stupid to pick up the phone)
Previous posts,
In response to an earlier article on this subject I commented that 'GM and Chrysler could go in on 31st March, recite 'The tale of Mad Karoo' and still get the moolah.' At first sight, looks like I was being unduly cynical. Obama is at least talking tough with them. Implicit in this article, though, is that the companies had formed much the same conclusion as myself! It would be interesting to see detailed copy of the 'restructuring' plan presented by GM: And Obama's remarks seem to have bounced Chrysler and Fiat into a premature disclosure. I doubt that would have been forthcoming at this stage without the threat to turn off the tap.
And yet, I'm not convinced that the Sainted Barack will be able to resist the immense pressure to prevent either, particularly GM, going tits-up if such becomes imminent. He's rather nailed his pants to the mast by talking about letting your auto industry die not being an option. Seems that, like all politicos, he's trying to play to every audience at once. At least, with his intelligence, he should be able to do it convincingly.
As for your more general remarks about the financial crisis, remember that the trigger for this mess was over-exposure in the US sub-prime mortgage market. Now even Dubya was not responsible for that, though his administration did nothing to try to combat the problem. It had been building for years. Who was it that 'encouraged' Fannie mae n' Freddie mac to lend so much to poor risks on minimal security?
Step forward, Bill Clinton!
RE: It would be interesting to see detailed copy of the 'restructuring' plan presented by GM: And Obama's remarks seem to have bounced Chrysler and Fiat into a premature disclosure.
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The auto situation could not have remained in stasis - there would have been another request for funding, and after AIG (a silly minor issue in financial terms) the public is fed up with endless bailouts.
The government board decided that the Volt was too expensive, and would not earn a profit. Nice technology; wrong timing. GM has to scale down, and the bondholders have to be forced to take a haircut, along with the retirees. Wagoner had years to get the company straightened out, but consistently lost market share. This current management is bound to GM's legacy, and fresh blood in charge is needed.
Chrysler is privately owned - the problem would be the unemployment resulting from an uncontrolled shutdown. Fiat has been in talks for awhile, and is literally paying nothing for Chrysler. Product lines need to be dropped. GM has too many brands, leading to too-heavy marketing expenses.
Saturn is dead. Buick, once a profit-maker in Asia, is losing sales to BMW and Audi as the Chinese earn a better living, and want upscale vehicles. Pontiac is redundant, sadly - my first car was a 1967 Tempest Custom Hardtop with 4-bbl 326 CI, disc brakes, and CD ignition - which were rarely ordered back then. Pontiac will field a few models - hopefully, no more Azteks.
Most importantly, a bankruptcy will work around the franchise laws that protect dealerships - of which there are too many; counting all GM brands. Ford has fewer nameplates (Ford, Lincoln, Mercury, trucks) - and that's plenty. Saab is gone. Volvo is gone. The only way to shrink GM to a fighting weight is killing brands, and their marketing departments. Jaguar was Ford's mistake. Land Rover is the wrong vehicle in this economy. The majors should have improved their own vehicles, rather than making expensive acquisitions to gain total share.
www.bloomberg.com/apps/news?pid=20601087&sid=a1Fq6HpfvYAI&refer=home
March 31 (Bloomberg) -- General Motors Corp. faces a structured bankruptcy managed by the U.S. government if the company can’t meet a deadline to drastically reduce debt in the next 60 days.
GM Chief Executive Officer Fritz Henderson, on his second day running the largest U.S. automaker, said yesterday that a strategic bankruptcy with government backing is less risky than traditional Chapter 11 protection, though it’s still not GM’s preferred method of survival.
“I think bankruptcy is a very viable option, much better than a receivership,” said Ken Klee of Klee Tuchin Bogdanoff, a bankruptcy firm not involved with the automakers. “It needs to be treated as though it’s in the emergency room.”
At stake is $27.5 billion in GM debt that bondholders have been reluctant so far to exchange for equity and $20.4 billion in obligations to a union-run health care fund. It isn’t clear whether the government is using bankruptcy as a threat to hasten the exchange.
“While the company has made meaningful progress in its turnaround plan over the last few years, the progress has been far too slow, allowing the company to continue to lag behind the best-in-class competitors,” according to a task force report.
Obama said yesterday that company creditors, shareholders, workers, dealers and suppliers will be expected to make more sacrifices. “We believe that there could be a viable business within GM if the company and its stakeholders engage in a substantially more aggressive restructuring plan,” the Obama task force report said.
White House spokesman Robert Gibbs said the administration isn’t pushing for bankruptcy and there’s “no pre-determined deal.” “If that was the case we would have done that today,” Gibbs said in an interview yesterday. “Where this ends up is going to be determined in the next 30 to 60 days.”
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SP4: !Mar 30th, 2009 - 16:17:35
hahahahahahahahahahahahahahahaha! Obama.....hahahahahahahahaha!
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