WORLD> America
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WORLD> America
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Obama asserts gov't control over the auto industry
(Agencies)
Updated: 2009-03-31 10:37 The latest addition to the list, the once-proud US auto industry, has struggled with foreign competition for more than a generation, then was further battered by the recession and credit crisis gripping the economy. Obama said 400,000 industry jobs have been lost in the past year alone, many in Michigan.
Chrysler Chairman Bob Nardelli sought to assure customers, dealers, suppliers and employees that the automaker "will operate 'business as usual' over the next 30 days" while working closely with the government and Fiat to secure the support of stakeholders. Sergio Marchionne, CEO of Fiat, issued a statement calling the Obama administration's involvement "tough but fair, and we believe we will arrive at a result that will establish a credible future for this crucial industrial sector and that assigns the right priority to the repayment of US taxpayers' funds."
Fiat executives have talked to administration officials about a proposal to acquire a 35 percent stake in Chrysler in exchange for small car technology, transmissions and other items that Chrysler has valued at $8-$10 billion. There was no immediate response from the United AutoWorkers Union. One worker, Don Thompson, 56, of Chesterfield Township in Michigan, said automakers were being punished because of public anger over the banking bailout. "They're using us for the mistakes they've made in Washington," he said. Other workers alleged a double standard in how Washington dealt with Wagoner, as opposed to CEOs of bailed-out banks. "They're using him as a fall guy," said Frank Rowser, financial secretary for UAW Local 909. When Wagoner leaves the automaker, he will take a financial package worth an estimated $23 million. Ford Motor Co., the third member of the Big Three, has not requested federal bailout funds. Obama said bankruptcy would be a way for either GM or Chrysler to "quickly clear away old debts that are weighing them down so they can get back on their feet," and stressed that either firm would remain open. "What I am not talking about is a process where a company is broken up, sold off and no longer exists. And what I am not talking about is having a company stuck in court for years, unable to get out," he said. Still, fears about the industry's future sent stocks plummeting, with the Dow Jones industrial average losing about 254 points. GM plunged 92 cents, or 25.4 percent, to $2.70. Chrysler is not publicly traded. Obama's remarks were prompted by the expiration of a temporary bailout approved by the Bush administration last winter, with $17 billion in federal funds to help GM and Chrysler survive. Under its terms, the two automakers had until March 31 to submit restructuring plans as it searched for additional federal funds. At the time, it appeared Bush had avoided an industry collapse on his watch yet had deferred the most difficult decisions for his successor. By his comments, Obama bought himself a little more time, but made it clear it was fast running out. "Now is the time to confront our problems head-on and do what's necessary to solve them," he said. The administration issued papers detailing the prospects for survival of both GM and Chrysler, credited them with making difficult choices, yet also stressing the difficulties that remain. It said that while GM's new car of the future, the Volt, "holds promise, it will likely be too expensive to be commercially successful in the short run." The government has said it's willing to provide another $6 billion in financing for Chrysler if it is able to finalize an alliance with Italy's Fiat Group SpA. But to get the money, Chrysler must rid its balance sheet of most of its debt, including any investment by its private owners. That means Chrysler's majority owner, Cerberus Capital Management LP, would have to give up the $1 billion interest it has in the automaker, according to a person briefed on the deal. The person asked not to be identified because terms are still being negotiated. Cerberus would retain ownership in Chrysler's financial arm, but it has pledged to the government the first $2 billion in profits to repay a federal cash infusion, the person said.
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