US carmakers pushing closer to bankruptcy
March 31, 2009 by David Twomey
In a harsh turn of events the US President, Barack Obama, has ordered General Motors and Chrysler to accelerate their turnaround efforts and brace for possible bankruptcy, saying bailout funds will be limited and poor decision-making will not be excused.
President Obama said neither company had gone far enough in their restructuring plans to warrant substantial further taxpayer investments, but he would give them a little more time to reach concessions with workers, investors and other stakeholders.
“We cannot, we must not, and we will not let our auto industry simply vanish,” Mr Obama said in remarks at the White House that were partly overshadowed by his decision to force out GM CEO Rick Wagoner. “It is a pillar of our economy that has held up the dreams of millions of our people.”
Mr Obama is promising only to fund Chrysler’s operations for the next 30 days, as it works to complete an alliance with Italian carmaker Fiat.
GM would get 60 days to rework its plans and its new CEO said a court-supervised restructuring in bankruptcy might be necessary.
GM had sought more than US$16 billion in new aid after getting US$13.4 billion in December, while Chrysler wanted US$5 billion on top of US$4 billion that it got at the end of 2008.
Jared Bernstein, a member of the US administration’s Autos Task Force, told Reuters Financial Television that a process that split off the “bad” assets of GM or Chrysler, and sent those through a court-supervised bankruptcy, was a possibility, but US officials had not yet decided to pursue that option.
“I don’t think we’re at that level of analysis until we see the kinds of changes and adjustments, concessions that are going to be made over the next 60 days,” Mr Bernstein said.
With US vehicle sales near 30-year lows, Mr Obama has also moved to reassure would-be car-buyers, saying the government would stand behind the warranties of GM and Chrysler.
He also offered his support for a tax credit incentive of up to $5000 to trade in older and less fuel-efficient vehicles.
The US car industry, including cash-strapped dealers and suppliers, has cut 400,000 jobs over the past year while losing billions of dollars.
Print it: 
I never thought they would really end up bankrupt. They haven’t been able to come up with a viable plan in the last year what makes them think it can be done in the next 30 to 60 days? Obama needs to shut them down and re build them from the ground up. It is the only answer really.
“He also offered his support for a tax credit incentive of up to $5000 to trade in older and less fuel-efficient vehicles”
Gee wouldn’t be hard to fine those “less fuel-efficient vehicles” in the US now would it. Particularly when every second vehicle is an SUV or pickup.
Whilst this doesn’t surprise me, (I often thought the only way out for GM was to file, thus effectively shutting out the UAW) it still amazes me that the congrees pushes so hard on something so important to the countries core economy, forcing changes so fiercely yet allows AIG and the rest of the real crash makers off with a few stern words. Even when they are claiming multi million dollar performance bonuses for sending their respective companies and countries to the wall!
Can anyone explain the balance here?
Again Brett, whilst so many people say that the D3 are wrong for their reliance on SUV’s and Pick Up’s, have a look at what the best selling vehicles are over there. Also have a look at, class by class, the top five most fuel efficient vehicles in the states and realistically the only detroit based manufacturer to be dragging the chain is Chrysler.
Sorry but blaming the vehicle mix is just not being truthful.
Frontman,
No you missunderstood the sentiment of my post. I’m not blaming the manufaxctures for giving the customer what they want.
I was just refering to Bernstein’s support for the tax incentive to get out of less fuel efficient vehicles, and the ready availability of millions of them on the US roads. It was more of a commentry on the US motorist psyche of big or bigger, that on the automakers themselves.
Whilst it is sad that many people will be out of a living due to the mismanagement of these companies, these manufacturers should not be allowed to be artificially propped-up. Their demise will mean that lean, efficient producers will be the survivors of this debacle.
The amount of new vehicles produced/sold in recent years is simply unsustainable – there are enough cars in the world as it is, and economies of scale are only being realised now. There is a natural attrition rate of old-to-new cars, which is far lower than the amount being driven on to car lots worldwide recently.
It is almost inevitable now that GM will end up in Chapter 11.
The real irony is that Chrysler is the biggest basket-case of them all and it will probably survive, at least temporarily, courtesy of the Fiat alliance. No doubt Fiat realises it has Chrysler over a barrel and will screw Chrysler the same way they screwed GM in that ill-fated debacle.
I think it was the wrong decision to have Rick W as he fall guy.
They need as many experienced executives as possible and having the US goverment dictate who hires and fires CEO’s from private companies does nothing to solve the problem they claim needs fixing.
Lets hope Holden will go as well. They are basically a Daewoo importer anyway………it will be best for all in the long run.
Adam, the guy’s experienced at running the company to the ground, that’s about it. The US govt has the right to dictate, given the amount of money they have splurged on them already.
If GM and Chrylser went bankrupt all it would mean is the car industry would have only competition from the Japs, Italians and Germans… Ohh boo hoo we all loose…!
Enlist,
The biggest ramification for Japanese automakers in the event of a major failure of the US auto industry would be the effect it would have on major parts suppliers like Delphi Corp, Bosch Auto Parts and TRW Automotive – suppliers which are used by the Japanese as well as the US marques. If one US car maker or more were to disappear, consumer spending in the USA would also be affected – a bad situation for any manufacturer, both domestic and foreign. And with the USA as the world’s largest automotive market, everyone is rooting for the survival of the home team – even the competition
But then Americans would need to drive something so they would buy more euro/jap cars thus pushing the parts market back into normal sales figures.
Theres gonna be fords everywhere and i like it . Wheelnut aint got much to say anymore when its gonna effect holden here to. No GM = No Holden
Gosh, GM Chrysler want ordinary folk’s money to fatten their dull bosses who make wrong decisions, don’t work hard, and keep on leeching public money. Why do americans need GM/Chrys ugly expensive dirty cars? Well, import jap or koreans or even some of survivor euros. That’s more economical and environment friendly.
Dan,
Wow…
If you believe that Rick w was responsible for the demise of GM, you need to educate yourself on how the auto manufacturing companies operate.
Goodbye GM/Holden and good riddance. How you can make such crap cars for so long is amazing. Long live the electric car!