President Obama has just finished his press conference
on the government's determination of the viability of General Motors and Chrysler, and the gist is that both automakers have failed to convince the feds that their business plans deserve further investment. Obama and his task force will give GM enough working capital to survive another 60 days and prove its viability, though no dollar amount was given. Chrysler, meanwhile, is being given another 30 days and working capital up to $6 billion to finalize a partnership deal with Fiat. If a deal can't be made and another partner is not found, Chrysler will get no more federal aid. Also, Fiat won't be allowed to take a majority stake in Chrysler until the automaker repays all the money it has borrowed from the government so far.
Perhaps the biggest news from the press conference is that the U.S. government will now fully back the warranties on vehicles sold by General Motors and Chrysler in the hopes that buyers will continue to consider their products amidst these tumultuous restructuring efforts. Also, the President has pledged to work with Congress to find funds to pay for a U.S.-version of the Cash for Clunkers program that has been so successful in Germany.
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[Photo by JIM WATSON/AFP/Getty]
Will the President's announcements today...
GM Statement on Auto Industry Restructuring
Today's announcement by President Obama begins a new era for the U.S. auto industry. It also marks a defining moment in the history of General Motors.
The U.S. Treasury will provide working financing capital for GM for 60 days while GM completes a more accelerated and aggressive restructuring to put the company on sound long-term financial footing. We understand the historic opportunity this presents, and we are fully committed to successfully completing the reinvention of GM.
As President Obama said today, the success of this reinvention is vital for GM, for the U.S. and global economies, and for the millions of employees, suppliers, dealers, retirees and others who depend on the company.
During the next 60 days, GM will address the tough issues to improve the long-term viability of the company, including the restructuring of the financial obligations to the bond holders, unions and other stakeholders. Our strong preference is to complete this restructuring out of court. However, GM will take whatever steps are necessary to successfully restructure the company, which could include a court-supervised process.
The men and women of GM, including our dealers, suppliers and other key partners, know what we must do to accomplish this task. We are fully committed to making this successful. We owe that to the GM community, to our customers, and to the U.S. taxpayers, who are providing support during this exceptionally challenging time.
Quotes attributable to Fritz Henderson, GM CEO
"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."
"We have significant challenges ahead of us, and a very tight timeline. I am confident that the GM team will succeed, and that a stronger, healthier GM will play an important role in revitalizing America's economy and re-establishing its technology leadership and energy independence."
"The administration has made it clear that it expects GM to expand and accelerate its restructuring efforts. I want the American people to know that we understand and accept this guidance. The road is tough, but the ultimate goal – a leaner, stronger, viable GM – is one we share."
General Motors Corp. (NYSE: GM), one of the world's largest automakers, was founded in 1908, and today manufactures cars and trucks in 34 countries. With its global headquarters in Detroit, GM employs 243,000 people in every major region of the world, and sells and services vehicles in some 140 countries. In 2008, GM sold 8.35 million cars and trucks globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, Hummer, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling. GM's largest national market is the United States, followed by China, Brazil, the United Kingdom, Canada, Russia and Germany. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. More information on GM can be found at www.gm.com.
GM is the majority shareholder in GM Daewoo Auto & Technology Co. of South Korea, and has product, powertrain and purchasing collaborations with Suzuki Motor Corp. and Isuzu Motors Ltd. of Japan. GM also has advanced technology collaborations with Chrysler LLC, Daimler AG, BMW AG and Toyota Motor Corp. and vehicle manufacturing ventures with several automakers around the world, including Toyota, Suzuki, Shanghai Automotive Industry Corp. of China, AVTOVAZ of Russia and Renault SA of France.
Genuine GM Parts and accessories are sold under the GM, GM Performance Parts, GM Goodwrench and ACDelco brands through GM Service and Parts Operations, which supplies GM dealerships and distributors worldwide. GM engines and transmissions are marketed through GM Powertrain.
Nardelli responds to president's plans
Today's announcement by the Administration represents an important step forward on our path to viability. The Administration, U.S. Treasury and the President's Auto Task Force have recognized Chrysler's viability as an important part of the U.S. auto industry and overall economy, and have provided a critical vote of confidence in our alliance with Fiat S.p.A.
We are appreciative that the government has supported a global alliance with Fiat. By providing Chrysler with product and platforms, technology cooperation and global distribution, the alliance with Fiat strengthens our ability to create and preserve U.S. jobs; to give U.S. consumers more choices of environmentally advanced vehicles; to give our dealers more of the products they need to succeed; to help stabilize the supplier base; and to pay back government loans sooner.
While the Administration's findings released today recognize our progress in reducing structural costs and improving quality, the report also cites the challenges that continue to face Chrysler in the areas of scale, quality, product mix, manufacturing and geographic concentration. However, the important point is that the task force concludes that the Fiat alliance will go a long way toward addressing these concerns. Going forward, the Administration has committed to provide working capital for the next 30 days as we achieve the necessary stakeholder concessions, and further our restructuring efforts.
So while today's news is a step in the right direction, we need to continue to manage our business through the current downturn. We need everyone to focus on controlling costs while improving quality and customer satisfaction. There also is much work remaining to achieve required concessions from important constituents to reach the restructuring targets that the government has established.
In addition, as we add more exciting, fuel-efficient vehicles to our showrooms it will be important that our customers have access to credit. That's why we continue to advocate further government support for Chrysler Financial in order to make reasonable loans available to many more consumers.
I want to thank you for the hard work and dedication that you have given to Chrysler during the past 18 months. While we know our quality is not yet where it needs to be, our improvement is clearly evident in the 30 percent reduction in warranty claims over the last 12 months, and the fact that Chrysler reported the fewest safety recalls of any major manufacturer in 2008. We also have continued to advance important new vehicle programs such as the all-new Dodge Ram, the electric-drive vehicles under development by our ENVI organization and the all-new Jeep Grand Cherokee that we will showcase next week at the New York Auto Show. We have continued to improve the fuel economy of our lineup, with 73 percent of our 2009 models offering improved fuel efficiency compared with the previous year's models, and we are well positioned to meet the more stringent fuel economy requirements coming in 2011.
I want to personally assure you that Chrysler will operate "business as usual" over the next 30 days. While we recognize that we still have substantial hurdles to resolve, Chrysler is committed to working closely with Fiat, the Administration, U.S. Treasury and the Task Force over the next 30 days to secure the support of necessary stakeholders. If successful, the government will consider investing up to the additional $6 billion requested by Chrysler to help this partnership succeed.
Thanks again for your continued support as Chrysler continues to move forward on its path to viability.