Do-or-die time for GM, Chrysler

WASHINGTON — The future of the North American auto industry was perched on a knife’s edge Monday after governments in Canada and the United States warned automakers to reinvent themselves or face bankruptcy.

Exterior view of General Motors' world headquarters in Detroit

Exterior view of General Motors' world headquarters in Detroit

WASHINGTON — The future of the North American auto industry was perched on a knife’s edge Monday after governments in Canada and the United States warned automakers to reinvent themselves or face bankruptcy.

U.S. President Barack Obama spurned General Motors and Chrysler in their pleas for more federal money, saying no more taxpayer dollars would be forthcoming until they dramatically altered their business plans.

“These companies — and this industry — must ultimately stand on their own, not as wards of the state,” Obama said in a statement at the White House.

Speaking a day after his administration ousted the chairman of General Motors, Obama said the government will provide financing to GM for 60 days while it comes up with a better restructuring plan.

Chrysler, on the other hand, must form a partnership with the Italian automaker Fiat within 30 days to get another federal dime. The automaker said Monday it was negotiating a new alliance “framework” with Fiat after claiming earlier in the day it had sealed a deal.

Obama said his plan was drafted after consulting officials in Canada and Mexico, adding that the Canadian government has “indicated its support for our approach.”

In Ottawa, Industry Minister Tony Clement said GM and the Canadian Auto Workers union would have to reopen their recent concession-filled agreement and find even more cost-cutting measures. The union rejected that idea.

“Going forward, the industry will undoubtedly be smaller, but if our efforts are successful it will be viable and it will support good jobs for Canadians,” Clement said.

“What has become apparent over the last few months is that this is not just a temporary blip in the marketplace. There is some fundamental restructuring that must take place.”

The fresh uncertainty surrounding the North American auto sector sent stocks tumbling on the heels of a spring rally that has seen equities surging for much of March.

General Motors employs 12,000 people in Canada while Chrysler employs 9,400. But tens of thousands of additional jobs are tied to the success of the two companies through the parts sector, suppliers and dealerships.

Obama said neither Chrysler nor GM had shown any real progress in overhauling its operations that would justify receiving the billions more in federal bailout funds..

Ford Motor Co., the third member of the Detroit Big Three, hasn’t requested federal bailout funds.

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