General Motors facing major changes

The Obama administration plans to give General Motors Corp. enough government aid to restructure over the next 60 days, while Chrysler LLC will get up to $6 billion and 30 days to complete an alliance with Italian automaker Fiat SpA.

General Motors chairman Rick Wagoner: asked by the Obama administration to step down.

WASHINGTON — The Obama administration plans to give General Motors Corp. enough government aid to restructure over the next 60 days, while Chrysler LLC will get up to $6 billion and 30 days to complete an alliance with Italian automaker Fiat SpA.

Two people familiar with the plan said Sunday it will demand further sacrifices from the automakers and bankruptcy would still be possible if the automakers failed to restructure.

President Barack Obama was announcing his plan today.

It includes government backing of warranties for GM and Chrysler vehicles to give consumers confidence in the U.S. automakers’ cars and trucks.

Administration officials said Sunday that General Motors CEO Rick Wagoner was stepping down immediately at the request of the White House, a sign of major changes at the auto giant.

GM has already received $13.4 billion in government loans and Chrysler has survived on $4 billion in federal aid.

The automakers have been hard hit by the economic downturn and the worst decline in auto sales in 27 years.

In progress reports filed with the government in February, GM asked for $16.6 billion more and Chrysler wanted $5 billion more.

But the officials said the Obama plan would not go that far, providing short-term aid in exchange for significant sacrifices.

The officials said the administration did not view Chrysler to be viable as a standalone company. Under the plan, the government would provide up to $6 billion to forge the alliance between Chrysler and Fiat, but if the companies failed to reach an agreement or find an alternative plan for viability, Chrysler would not receive additional federal aid.

Fiat executives have talked to the White House auto task force about a proposal to acquire a 35 per cent stake in Chrysler in exchange for small car technology, transmissions and other items that Chrysler has valued at $8 billion to $10 billion.

Canadian Auto Workers president Ken Lewenza said Sunday the moves in Washington make him nervous.

“That just puts all of us on more pins and needles,” he said. “It leaves us all in this…emotional state of what happens next?”

“I never ever thought the White House or the Parliament of Canada could manage and operate an automobile company.”

General Motors would have a limited window to work with the United Auto Workers, bondholders and other stakeholders and would receive an undisclosed amount of “interim financing” over 60 days to restructure the company. The officials said the administration would determine how much GM would need in “permanent capital” during the 60-day period.

If GM failed to reach the concessions needed, some type of bankruptcy could be used at the end of 60 days, the officials said.

The administration planned to send a team to Detroit to help with the restructuring during the next 60 days. With Wagoner’s departure, new management would be decided by General Motors’ board of directors in consultation with the government. An official said a majority of the GM board was expected to step down.

Obama, in an interview with CBS’ “Face the Nation” broadcast Sunday, said the companies must do more to receive additional financial aid from the government.

“We think we can have a successful U.S. auto industry. But it’s got to be one that’s realistically designed to weather this storm and to emerge — at the other end — much more lean, mean and competitive than it currently is,” Obama said.

Obama said the government would require a “set of sacrifices from all parties involved, management, labor, shareholders, creditors, suppliers, dealers. Everybody’s gonna have to come to the table and say it’s important for us to take serious restructuring steps now in order to preserve a brighter future down the road.”

Both companies are trying to reduce their debt by two-thirds and persuade the UAW to accept several cost-cutting measures.

Very little was being done in negotiations with debtholders and the union ahead of Obama’s announcement, a person briefed on the GM talks said Sunday. This person did not want to be identified because the negotiations are private.

Under the terms of a loan agreement reached during the Bush administration, GM and Chrysler are pushing the UAW to accept shares of stock in exchange for half of the payments into a union-run trust fund for retiree health care. They also want labor costs from the union to be competitive with Japanese automakers with U.S. operations.

Neither GM nor Chrysler have deals with the union on the trust funding or concessions from their debtholders and the administration has been trying to accelerate those efforts.

GM and Chrysler, which employ about 140,000 workers in the U.S., face a Tuesday deadline to submit completed restructuring plans, but neither company is expected to finish its work. The administration’s plan would be designed to accelerate those efforts.

GM owes roughly $28 billion to bondholders. Chrysler owes about $7 billion in first- and second-term debt, mainly to banks. GM owes about $20 billion to its retiree health care trust, while Chrysler owes $10.6 billion.

In February, GM said it intended to cut 47,000 jobs around the globe, or nearly 20 per cent of its work force, close hundreds of dealerships and focus on four core brands — Chevrolet, Cadillac, GMC and Buick.

Chrysler issued two scenarios in its February plan: one as a distinct company, and the second in an alliance with Fiat. Chrysler said in its February report that it would cut 3,000 workers and eliminate three vehicle models, the Dodge Aspen, Dodge Durango and Chrysler PT Cruiser.

———

AP Auto Writer Tom Krisher in Detroit contributed to this report.

Just Posted

PHOTOS: Samson Cree Nation Pow Wow

The Samson Cree Nation hosted its annual Pow Wow, celebrating youth last weekend

Come play at Medicine River Wildlife Centre

Grand opening of new playground

Red Deer group looking to keep roads safe for cyclists

A Red Deer cycling group is concerned about road safety after multiple… Continue reading

Smoke and pets do not mix

Take care of your pets during the smoky weather

WATCH: Raising money for kids at the Gord Bamford Charity Golf Classic

Former NHL players, Olympians, pro rodeo circuit members and musicians teed off… Continue reading

Canadian soccer captain Christine Sinclair continues to lead fight against MS

TORONTO — Christine Sinclair continues to have an impact on and off… Continue reading

In Franklin’s anthems, women heard an empowering message

NEW YORK — Aretha Franklin never saw herself as a feminist heroine.… Continue reading

Happy birthday Boler: 100s of cute campers in Winnipeg for anniversary gathering

WINNIPEG — Angela Durand sits outside her camper which is decorated to… Continue reading

Merkel, Putin share a headache: Donald Trump

FRANKFURT — German Chancellor Angela Merkel and Russia’s President Vladimir Putin will… Continue reading

Tim Hortons says its China expansion will include menu with congee, matcha

TORONTO — The president of Tim Hortons says a plan to conquer… Continue reading

Trump suggests Canada has been sidelined from latest NAFTA negotiations

OTTAWA — U.S. President Donald Trump is suggesting Canada has deliberately been… Continue reading

Photographer files complaint with police after alleged assault while on the job

TORONTO — A Toronto newspaper photographer said he opted to file a… Continue reading

Annual inflation rate jumped to 3.0% in July, highest reading since 2011

OTTAWA — Statistics Canada says higher gasoline prices helped push the country’s… Continue reading

Most Read


Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month