In an address from the White House Grand Foyer, President Obama said the U.S. Government has no interest - or intention - of running GM and Chrysler. Rather, in lending GM enough capital to operate for 60 days, Chrysler enough to operate for 30 days, the additional money is intended to give the automakers the opportunity to make the changes that will help them to emerge as solid, competitive companies in the marketplace. Obama warned that both companies' restructuring plans need to be revised as they do not go far enough or make changes significant enough in his administration's estimation.
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While GM will undergo a solitary restructuring - sans CEO Rick Wagoner who was forced to step down as part of the plan - Obama said that Chrysler "needs a partner to remain viable." He named Italy's Fiat as the strongest potential partner, and discussed that automaker's willingess to transfer cutting-edge technology to Chrysler as well as to build new cars and engines in U.S. plants. But he said that additional investments of taxpayer money must be made in order to make the partnership possible. He revealed that the government is prepared to lend up to $6 billion to help Chrysler's plan succeed. But they have just 30 days to reach a workable agreement that "protects taxpayers." If they take longer than that, he said, the Federal government will not be able to justify any more money to the ailing company.
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This led to Obama's unflinching discussion of the real possibility of bankruptcy proceedings for both companies. 17 minutes and 45 seconds into his address, he said that the path to recovery for one or both companies could mean using bankruptcy code. He called this possibility a tool that could make it easier to clear away old debts weighing them down and put them on their feet again. But he stressed that any bankruptcy proceedings would occur while the companies continue to build and sell cars and employ American workers. He said that in no case would a GM or Chrysler bankruptcy become a scenario where the companies were split up and sold, or one in which the proceedings languished in court for years.
Addressing strong industry concerns that Americans will not want to purchase cars from bankrupt automakers, Obama signaled the government's intent to back all automaker warranties, service, and repair. Warranties will be "safer than they've ever been," he said.
Spelled out, the four steps the Autos Task Force and newly named advisor Edward Montgomery will oversee are:
- Ensuring recovery act funds get out as quickly as possible to accelerate other federal fleet purchases of American vehicles
- Accelerating the consumer business lending initiative; this would mean working with finance companies to increase the flow of credit to consumers and dealers
- Introducing a new IRS tax benefit that for purchasers of American cars between February 16 and the close of the year. The benefit would allow purchasers to deduct the cost of the sales and excise tax on those sales, potentially saving car buyers hundreds of dollars.
- Re-instituting the Cash for Clunkers proposal that Obama claimed has met with success in European countries. He termed this congressional proposal an "even more ambitious sales program" and one that would drive both personal and fleet vehicle modernization.
Obama announced that the Canadian government, which is strongly impacted by the U.S. auto industry, has been consulted and approves of the Autos Task Force plan. He claimed that Edward Montgomery will "cut through red tape" to ensure automakers swift access to the full resources of the government.
The Dow Jones Industrial reacted to this news by dropping 270 points.