• Jun 1, 2009
Just before noon EST, President Obama gave a press conference concerning this morning's General Motors Chapter 11 bankruptcy filing. The man who made hope cool again tried to put as positive a spin as possible on the automaker's decision to file, claiming a "viable, achievable plan" is in place that will make the "New GM" a competitive, profitable business going forward. He highlighted specific points of the plan including GM's intention to produce a larger share of its vehicles in the U.S. In fact, if that happens, it would be the first increase in this country's share of GM's production in three decades.

The President also acknowledged the key players who made sacrifices to give GM's reorganization a chance at success. They include the United Auto Workers union (which has accepted further cuts in compensation and retiree health benefits), the shareholders, bondholders, as well as those creditors who own the majority of GM's debt. The latter group will get a fraction of what their owed, but the President pointed out that whatever they get will be more than if GM were liquidated through a Chapter 7 bankruptcy filing.

The President also had some explaining to do after making the U.S. government and all its taxpayers a 60% owner of the New GM. He called the government's role one of a "reluctant shareholder" and remarked that it would not exercise any control over how the company is run on a daily basis. In addition to the $20 billion in loans that GM has already received from the U.S. government (all of which will be forgiven), the government has pledged another $30 billion to get the automaker through this 60-90 day bankruptcy process.

We'll add the video of Obama's press conference as soon as it becomes available.

UPDATE 1: No video available yet, but the President's full remarks have been added after the jump.

[Image: Spencer Platt/Getty]

THE PRESIDENT: Good morning, everybody. Just over two months ago, I spoke with you in this same spot about the challenges facing our auto industry, and I laid out what needed to be done to save two of America's most storied automakers -- General Motors and Chrysler. These companies were facing a crisis decades in the making, and having relied on loans from the previous administration, were asking for more.

From the beginning, I made it clear that I would not put any more tax dollars on the line if it meant perpetuating the bad business decisions that had led these companies to seek help in the first place. I refused to let these companies become permanent wards of the state, kept afloat on an endless supply of taxpayer money. In other words, I refused to kick the can down the road.

But I also recognized the importance of a viable auto industry to the well-being of families and communities across our industrial Midwest and across the United States. In the midst of a deep recession and financial crisis, the collapse of these companies would have been devastating for countless Americans, and done enormous damage to our economy -- beyond the auto industry. It was also clear that if GM and Chrysler remade and retooled themselves for the 21st century, it would be good for American workers, good for American manufacturing, and good for America's economy.

I decided, then, that if GM and Chrysler and their stakeholders were willing to sacrifice for their companies' survival and success; if they were willing to take the difficult, but necessary steps to restructure, and make themselves stronger, leaner, and more competitive, then the United States government would stand behind them.

The original restructuring plans submitted by GM and Chrysler earlier this year did not call for the sweeping changes these companies needed to survive -- and I couldn't in good conscience proceed on that basis. So we gave them a chance to develop a stronger plan that would put them on a path toward long-term viability. The 60 days GM had to submit its revised plans have now elapsed, and I want to say a few words about where we are and what steps will be taken going forward. But before I do, I want to give you an update on where things stand with Chrysler.

When my administration took office and began going over Chrysler's books, the future of this great American car company was uncertain. In fact, it was not clear whether it had any future at all. But after consulting with my Auto Task Force, industry experts, and financial advisors, and after asking many tough questions, I became convinced that if Chrysler were willing to undergo a restructuring, and if it were able to form a partnership with a viable global car company, then Chrysler could get a new lease on life.

Well, that more promising scenario has now come to pass. Today, after taking a number of painful steps, and moving through a quick, efficient, and fair bankruptcy process, a new, stronger Chrysler is poised to complete its alliance with Fiat. Just 31 days after Chrysler's Chapter 11 bankruptcy filing, a court has approved the Chrysler-Fiat alliance, paving the way for a new Chrysler to emerge from bankruptcy in the next few days.

What happens next is in the hands of their executives, managers, and workers -- as it is for any private company. But what the completion of this alliance means is that tens of thousands of jobs that would have been lost if Chrysler had liquidated will now be saved, and that consumers have no reason at all to worry about a restructuring -- even one as painful as what Chrysler underwent.

And keep in mind -- many experts said that a quick, surgical bankruptcy was impossible. They were wrong. Others predicted that Chrysler's decision to enter bankruptcy would lead to an immediate collapse in consumer confidence that would send car sales over a cliff. They were wrong, as well. In fact, Chrysler sold more cars in May than it did in April, in part because consumers were comforted by our extraordinary commitment to stand behind a quick bankruptcy process. All in all, it's a dramatic -- an outcome dramatically better than what appeared likely when this process began.

Now the situation we found at General Motors was very different from what we found at Chrysler -- largely because GM is a different kind of company. It is much larger and much more complex, with operations all over the globe. In this context, GM's management team -- including its new CEO, Fritz Henderson, its interim chairman, Kent Kresa, and all of their colleagues -- have worked -- has worked tirelessly to produce a plan that meets the strict standards I laid out at the beginning: to streamline GM's brands, clean up GM's balance sheet, and make it possible for GM to compete and succeed.

Working with my Auto Task Force, GM and its stakeholders have produced a viable, achievable plan that will give this iconic American company a chance to rise again. It's a plan tailored to the realities of today's auto market; a plan that positions GM to move toward profitability, even if it takes longer than expected for our economy to fully recover; and it's a plan that builds on GM's recent progress in making better cars. As this plan takes effect, GM will start building a larger share of its cars here at home, including fuel-efficient cars. In fact, if all goes according to plan, the share of GM cars sold in the United States that are made here will actually grow for the first time in three decades.

Now, any time a business as large as General Motors goes through a restructuring, it is extremely difficult to find common ground among all of the company's stakeholders. But while the deal that has been worked out is tough, it is also fair.

It will require the United Auto Workers to make further cuts in compensation and retiree health care benefits -- painful sacrifices on top of all that they have already done.

It will require GM shareholders to give up the remaining value of their shares -- just as they would have had to do in any private restructuring of this kind.

And it will also provide unsecured bondholders with an equitable outcome -- an outcome that will let them recover more than the current value of their claims, and substantially more than they would have recovered if the government had not intervened and GM had liquidated. That's why a majority of GM's bondholders already support this deal.

Throughout this process, I wanted to ensure that none of GM's stakeholders receives special treatment because of our government's involvement. That's why I instructed my Auto Task Force to treat all of GM's stakeholders fairly and to ensure that this restructuring was carried out in a way that was consistent with past precedent -- and it was.

What we have, then, is a credible plan that is full of promise. But GM can't put this plan into effect on its own. Executing this plan will require a substantial amount of money that only a government can provide. Considering GM's extensive operations within their borders, the governments of Canada and Ontario have agreed to do their part with an investment in GM's future, and I want to thank them for doing so. I also want to thank the government of Germany for working diligently to reach a Memorandum of Understanding on the sale of a major stake in GM's European Division and for providing interim funding that will make it possible for that transaction to be finalized.

But of course GM is an American company with tens of thousands of employees in this country, and responsibility for its future ultimately rests with us. That's why our government will be making a significant additional investment of about $30 billion in GM -- an investment that will entitle American taxpayers to ownership of about 60 percent of the new GM.

Now, let me talk about this. I recognize that this may give some Americans pause. So let me explain as clearly as possible why we are making this investment. We inherited a financial crisis unlike any that we've seen in our time. This crisis crippled private capital markets and forced us to take steps in our financial system -- and with our auto companies -- that we would not have otherwise even considered. These steps have put our government in the unwelcome position of owning large stakes in private companies for the simple and compelling reason that their survival and the success of our overall economy depend on it.

Understand we're making these investments not because I want to spend the American people's tax dollars, but because I want to protect them. Instead of taking so much stock in GM, we could have simply offered the company more loans. But for years, GM has been buried under an unsustainable mountain of debt. And piling an irresponsibly large debt on top of the new GM would mean simply repeating the mistakes of the past. So we are acting as reluctant shareholders -- because that is the only way to help GM succeed.

What we are not doing -- what I have no interest in doing -- is running GM. GM will be run by a private board of directors and management team with a track record in American manufacturing that reflects a commitment to innovation and quality. They -- and not the government -- will call the shots and make the decisions about how to turn this company around. The federal government will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions. When a difficult decision has to be made on matters like where to open a new plant or what type of new car to make, the new GM, not the United States government, will make that decision.

In short, our goal is to get GM back on its feet, take a hands-off approach, and get out quickly.

Exiting a restructuring of this scale, however, requires not only new investment. It also requires giving GM a chance to start anew by clearing away the massive past debts that are weighing the company down. And that's why earlier today, GM did what Chrysler has successfully done and filed for Chapter 11 bankruptcy with the support of its key stakeholders and the United States government.

In all likelihood, this process will take more time for GM than it did for Chrysler because GM is a bigger, more complex company. But Chrysler's extraordinary success reaffirms my confidence that GM will emerge from its bankruptcy process quickly, and as a stronger and more competitive company. And I want to remind everyone that if you are considering buying a GM car during this period of restructuring, your warrantees will be safe and government-backed.

So I'm confident that the steps I'm announcing today will mark the end of an old GM, and the beginning of a new GM; a new GM that can produce the high-quality, safe, and fuel-efficient cars of tomorrow; that can lead America towards an energy independent future; and that is once more a symbol of America's success.

But I want to be honest with you. Building a leaner GM will come at a cost. It will take a painful toll on many Americans who have relied on General Motors throughout the generations. So I want to say a word directly to all the men and women watching today, wondering what all of this will mean as far as their own lives are concerned.

I know you've already seen more than your fair share of hard times. We saw 400,000 jobs lost in the auto industry in the year before this restructuring even began. I will not pretend the hard times are over. Difficult days lie ahead. More jobs will be lost. More plants will close. More dealerships will shut their doors, and so will many parts suppliers.

But I want you to know that what you're doing is making a sacrifice for the next generation -- a sacrifice you may not have chose to make, but a sacrifice you were nevertheless called to make so that your children and all of our children can grow up in an America that still makes things; that still builds cars; that still strives for a better future.

As our autoworkers and auto communities pass through these difficult times, we, as a nation, must do our part. That's why, in March, I appointed Ed Montgomery Director of Recovery for Auto Communities and Workers. That's why two weeks ago Ed announced a green jobs training program for autoworkers in hard-hit communities. And that's why last week Ed and Karen Mills, my Small Business Administration chief, traveled to Indiana to announce a new plan to provide loans to auto, RV, and boat dealers to help finance floor plans. That's why we are accelerating the purchase of a federal fleet of cars to jumpstart demand and give the industry a boost at a time when it needs one. And that's why I'm calling on Congress to pass fleet modernization legislation that can provide a credit to consumers who turn in old cars and purchase cleaner, more fuel-efficient cars. These are important steps on the long road to overcoming a problem that didn't happen overnight and will not be solved overnight.

I recognize that today's news carries a particular importance because it's not just any company we're talking about -- it's GM. It's a company that's not only been a source of income, but a source of pride for generations of autoworkers and generations of Americans. But while the GM of the future will be different from the GM of the past, I am absolutely confident that if well managed, a new GM will emerge that can provide a new generation of Americans with a chance to live out their dreams, that can out-compete automakers around the world, and that can once again be an integral part of America's economic future. And when that happens, we can truly say that what is good for General Motors and all who work there is good for the United States of America.

Thank you, everybody.


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    • 1 Second Ago
  • 70 Comments
      • 5 Years Ago
      Sickening...the government is way beyond its sphere of the guidelines established by the Constitiution. THIS government is outa' control. The paybacks to the unions are covered up, the government cronies are all dipping in the well and NOTHING has CHANGED! It was a political slogan and nothing more. This government is a joke! Even the Russian paper Pravda said we were moving "toward Marxist socialism at a very fast rate, even more so now with Obama now in charge"! Some compliment!
      • 5 Years Ago
      Im glad Obama is at least trying to get this sh*tty country up and running again.Good job Obama.
      • 5 Years Ago
      'He called the government's role one of a "reluctant shareholder" and remarked that it would not exercise any control over how the company is run on a daily basis.'

      Hahah, funny one. Not exercise any control... except for firing the CEO Wagoner... except for telling the company it needs to shift its focus on 40mpg cars... except for choosing its board. When you intentionally change the top-level management with people who support your viewpoints, you already DID exercise control over the company, and lots of it.
        • 5 Years Ago
        @Aki

        Exactly right! This guy has ZERO executive experience, a auto task force that has ZERO automotive industry experience and now he all of a sudden has a viable plan to turn around one the largest companies in the world? LOL!
        • 5 Years Ago
        It's just like the energy game: "you can't have oil [no drilling], you can't have coal [too dirty], you can't have nuclear [too scary]... but all that energy we import is making us too dependent, we need green stuff!"

        If you legislate the rules, you don't have to directly tell anyone what to do, they just don't have a choice.
        • 5 Years Ago
        Notice he said not "on a daily basis." So he can chime in every other day.
      • 5 Years Ago
      When do I get my check for being for being a share holder when he makes a profit with his company?
      • 5 Years Ago
      "the President pointed out that whatever they get will be more than if GM were liquidated through a Chapter 7 bankruptcy filing."

      That surprises me. Wasn't their plan to split the company into "Good GM" and "Bad GM" and sell off the parts in Bad GM? I would expect they would get more money from selling off the good parts than the bad parts.
        • 5 Years Ago
        Bad GM will have assets like Pontiac brand name, Hummer brand name, Saturn and Saab, wouldn't it be crazy if Bizzaro GM made a comeback as an independent car company?
      • 5 Years Ago
      I don't think this was handled well at all. I can't imagine GM (or Chrysler) is going to get very far without more money, so after the concept of secured lender priority was decimated by the bankruptcy court what pea-brained entity would even consider lending Government Motors any money?

      Oh yeah, Government Bank.
      • 5 Years Ago
      If anyone ever blames Bush's spending for any of our future problems from this point forward, may your genitals be bitten off by a rabid beaver.

      Seriously, nobody gets to criticise George W Bush's Iraq War as being the thing that killed our economy....

      Not when Barack W Obama spends 30 billion on a 60-90-day period for ONE COMPANY!


      Okay, so perhaps it was Bush's mistake to bankroll a huge budget and huge deficit. ... but how is that an excuse for Obama to make it worse????


      When was the last time we had a good president? I mean not one that was only slightly crooked, or slightly dumb, but a GOOD one?

      I'm thinking upwards of 3 decades. More depending on what you define as 'crooked' or 'dumb'.


      The only reason to have a Commander-in-Chief is someone to push the button in event of nuclear annihilation. That being a rare possibility these days, I'm starting to wonder what the point is to having that much power in the hands of one man.


      Seriously, if a US President can only make the country go from bad to worse successively, why do we need this position?

      No, I'm not an anarchist, I just think this position is too powerful and when repeatedly filled with idiots for successive terms, they do TREMENDOUS damage.

      Abolish the presidency. Seriously. Get Americans involved in their state and local legislatures. Memorize your local politicians and hold them accountable for our best interests.

      Hope in one man is a dead-end road, as we've seen for the last X-number of administrations. Nothing has 'changed' for the better.

      [/rant]
        • 5 Years Ago
        why not the LS2LS7?: I don't think any of your points are valid. First off Haliburton made MORE money during the Clinton administration than the Bush administration. So all the talk of Haliburton being in cohorts with Bush was left-wing propaganda garbage, spewed by hacks like Michael Moore.

        Obama's bailout was more than Bush's, $825 versus $700 billion.
        • 5 Years Ago
        By their very nature, are beavers not all a bit rabid?
        • 5 Years Ago
        LS7,

        So they are both wrong, great. But Obama is shaping up to be 12x more wrong on the economy than Bush.

        You're comparing what Bush spent in 8 years to what Obama has spent in 8 months.

        Sorry but that is REALLY ignorant.


        MY point is that if you think Bush got us into a mess, then the mess that Obama has us heading for is 12 times worth, since he spends in a month what Bush spent in a year. (rough).


        Say nothing about the fact that Bush didn't really cause a recession. That was just another bubble bursting. WE are the problem, the fickle consumer. That's life.


        Companies in the US, along with shareholders and stock buyers are thinking too short-term. What those markets are doing are no longer long-term indicators.


        dot-com bubble preceded dot-com bust
        housing bubble preceded housing bust
        credit bubble preceded credit bust
        automaker bubble preceded automaker bust


        We've been chasing inflated markets for 10+ years. What makes any idiot in this country think that re-inflating a bubble won't end in a bust when the 'stimulus' runs out?

        Guess what? Obama wants to re-inflate these markets and add a 'green' market SIMULTANEOUSLY! The bust from this WILL be catastrophic. Potentially bankrupting our economy, worldwide depression.

        2008 was FAR from the worst it could get. Another stimulus? That's just prolonging the inevitable.

        The economy was never really growing recently, we just keep dumping money in inflated markets. The true value of the economy is either staying the same or shrinking, as indicated by when we hit the bottom of each swell.

        NO administration can change that. No hope. No change. Just waste. That is all big government is good for. They want their own promotions, raises, favors, friends, allies in office. More useless bureaucrats is the ONLY reason Obama is pushing his agenda. It is naive to think this helps the average taxpayer.


        • 5 Years Ago
        You have an awesome name, and I'd like to subscribe to your newsletter.
        • 5 Years Ago
        Red,

        With all due respect, you're wrong.

        Having 'a direction' on the economy does not prove competence. Having 'no direction' is in the middle between having the 'right direction' and the 'wrong direction.'

        We chose the WRONG one. Obama's plan to spend as much as possible to 'fix' an economy is an effort in futility that only pays negative dividends.

        The ONLY thing his future State-of-the-Union can imply is that the economy is growing in terms of dollar-value. That's useless information when inflation starts to skyrocket because we owe 20-30% on all dollars spent.

        Growth is not possible if inflation outpaces growth. Period. It may appear that way with good 'indicators' but the bottom line is, that money is still owed to someone else.

        Inflation WILL outpace growth for decades, due to this administration's actions in the first 8 months. Doesn't matter what the stock market, housing market, jobs market does. All 'touched up' values that you'll be seeing on CNN money.


        McCain and Palin might not have been a 'fix' to the problem, but doing nothing literally would have been better than spending this many trillions.


        Having no president at all would have been a better 'direction' than the last 2 or 4.
        • 5 Years Ago
        PJ,

        And?

        Black Bush blew that off in his first 100 days in office.

        Bush's war is NOT an excuse to increase spending. If this country had ANY common sense we'd be repaying debts not increasing them.
        • 5 Years Ago
        30 billion? The Bush admin gave more than that to Halliburton alone and more to the banks (even during the Bush admin when the bank bailouts were relatively small compared to after).
        • 5 Years Ago
        Kinda hard to be "good President" when the "bad Presidents" before you continually f***** things up. Not saying Obama's good nor bad, but judgement will be passed the day he steps out of office. At this point, I'm not so sure, but I can pretty confidently say, he's doing a better job than McCain and "wtf" Palin would've done, just based on their "plans" during the campaign. No offense to him nor any conservatives; I'm just saying that particular team had no real direction regarding the economy.

        That said, I'm not so sure Obama's team does either...
        • 5 Years Ago
        "Seriously, nobody gets to criticise George W Bush's Iraq War as being the thing that killed our economy....Not when Barack W Obama spends 30 billion on a 60-90-day period for ONE COMPANY!"

        Uhh... the total cost of George's Excellent Adventure in Iraq is $930 billion as of January 2009.
      • 5 Years Ago
      lol funny americans. well, I'm off to my igloo now, that maple syrup won't eat itself lol
        • 5 Years Ago
        On a per captia basis Canadian taxpayers are way farther in the hole from aiding Chrysler and GM the past few years than the Americans. On top of that the shift of production back to the US will probably mean even more job losses in Canada. You should do a bit more research before you post. You are making the rest of us look bad.
        • 5 Years Ago
        You are a complete MORON Medhi...

        Yes... you are in a position to judge an entire country and represent a country as well.
        • 5 Years Ago
        Thank god i'm not Medhi.

        I find it interesting you feel the need to reply to my comment.
        Interesting enough to reply back, but not interesting enough for my reply to be as thought-out as yours.

        on a side note, E3 2009 is right now! much more interesting than your boring politics!
        • 5 Years Ago
        We can't be quite that smug, unfortunately... our government is lending $9.5 billion for the "New GM" and will hold about 12% the equity of it.
      • 5 Years Ago
      (Not that I am planing to buy a GM vehicle, but...)

      So, does this mean every tax payer will get employee pricing on all GM products?
      • 5 Years Ago
      @BigWill


      "give a man a fish and you feed him for a day. teach a man to fish and you feed him for a lifetime"

      That's the difference friend!
      • 5 Years Ago
      The short answer - since we're spending $100 billion and with countless more to go with no end in sight for the purpose of keeping people in unsustainable jobs, I'd just cut the fiction, call it welfare, spend it as welfare, and not bother filtering all that money through the bureaucracy of two failing auto companies and their union.
      • 5 Years Ago
      How can you tell if someone in washington is lying???


      Their mouth is moving and sound is coming out.
        • 5 Years Ago
        Exactly.

        AB: "Obama...claiming a "viable, achievable plan" is in place that will make the "New GM" a competitive, profitable business going forward."

        Geez, even I could do that with 50billion. I mean, how tough is it to come up with an achievable plan when the fed bankrolls you by spending future generations (read: not-yet-voters) into oblivion without any checks or balances. And who is going to be in office to take responsibility for this in 10 years if/when it doesn't pan out?

        • 5 Years Ago
        This is soooo wrong!

        Yeah, the government needed to step in to protect American jobs, but their plan is about as fail-safe as the California budget.

        First, they prop up ailing Chrysler, so that Fiat can scrape up the spoils. Say, goodbye to Chrysler engineering , R&D, et al. That is all going to move to Italy now.

        Now, the Feds want to pour more taxpayer money down the toilet at RenCen. Oh, let's forgive the first $20 billion we gave them because that is now part of old GM. But we will still drop another bucket load of cash to the tune $50 billion or more to pad those cushy offices in the ivory towers.

        Maybe when they come to their senses and realize that they have chopped off too much of the old GM for the new GM to survive, they might get a clue. Short term it will appear that GM is more viable than the previous iteration. However long term results will completely overshadow any short term gains.

        GM cannot survive pumping out only 2 million vehicles per year. Neither can Chrysler. And Ford may soon be on the glide path to the tar pits as well.

        It would have been more advantageous to merge Chrysler and GM. Chrysler would have gained GM's compact and midsize car replacements by this September!
        Cobalt/Cruze = new Dodge Neon
        Aura/Insignia = new Dodge Daytona
        Only the specifics and market plan have to be tweaked for this plan to work immediately, not 18 months from now.

        GM would gain a larger market share overnight thus protecting American industry from further foreign invasion. A larger portfolio would entail much better marketing than has been employed in the pats, but the inherent economies of scale would greatly enhance the venture from the get go.

        The cost of this kind of plan would be be about half of what Obama envisions is necessary. All he had to do was buy out the bondholders for $27 billion and that would be the entire government stake in the rescue effort. The unions already settled for their $20 billion piece of the pie.

        That leaves the door still wide open for free market investors. You need lots of investors to maintain an unwieldy ship like the General. The government cannot; will not; and should not try to fund the entire restructuring of GM. It just isn't feasible.
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