Washington - The White House hardened its stand Monday on new aid for ailing US carmakers, saying General Motors needs a "more aggressive" restructuring and Chrysler must seal a deal with Fiat to be viable.
President Barack Obama's auto task force said neither firm is viable at present but that both have a chance to avert bankruptcy if the new moves are taken.
Obama said recovery for the auto sector will require "unprecedented" efforts, and that bankruptcy may be needed for GM and Chrysler to survive.
"We cannot, we must not, and we will not let our auto industry simply vanish," Obama said as his task force unveiled its findings.
"It is a pillar of our economy that has held up the dreams of millions of our people. But we also cannot continue to excuse poor decisions. And we cannot make the survival of our auto industry dependent on an unending flow of tax dollars."
Obama said that if GM and Chrysler cannot come up with viable plans to return to profitability, they may need to use the bankruptcy process "as a mechanism to help them restructure quickly and emerge stronger".
He said that if this option is used, it would mean that the firms "with the backing of the US government," can "quickly clear away old debts that are weighing them down so they can get back on their feet and onto a path to success".
"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," the president added.
To help the carmakers survive, Obama said, "it will take an unprecedented effort on all our parts - from the halls of Congress to the boardroom, from the union hall to the factory floor - to see the auto industry through these difficult times."
Wagoner forced out
GM chairperson and chief executive Rick Wagoner was forced out at the request of Obama, as the task force unveiled grim prospects for the companies demanding an extra $21.6bn in loans.
The task force warned neither company had met the strict conditions laid down under an earlier $17.4bn government bailout agreed late last year.
The plans submitted by GM and Chrysler "did not establish a credible path to viability," the task force report said.
"In their current form, they are not sufficient to justify a substantial new investment of taxpayer resources. Each will have a set period of time and an adequate amount of working capital to establish a new strategy for long-term economic viability."
But the task force said that privately held Chrysler, the third largest of the Detroit Big Three, had no viability as a standalone company and demanded it seek a partner.
The administration said it would provide Chrysler with "working capital for 30 days to conclude a definitive agreement with Fiat and secure the support of necessary stakeholders".
If that succeeds, the government "will consider investing up to the additional six billion dollars billion requested by Chrysler" but would halt the aid if no partnership is reached.
GM, the largest US automaker, meanwhile was granted an extra 60 days "to develop a more aggressive restructuring plan and a credible strategy," the task force said.
Obama said the situation at Chrysler "is more challenging" and added, "it is with deep reluctance but also a clear-eyed recognition of the facts that we have determined, after a careful review, that Chrysler needs a partner to remain viable."
GM and Chrysler have been seeking the extra cash to weather the economic crisis and avert bankruptcy that executives say could have harsh repercussions.
Failure of leadership
The government bailout begun last year required deeper job cuts, new agreements with unions to slash costs and acceptance by bondholders of a plan to cut the automakers' debt.
The Treasury Department said it was backing the warrantees of the two firms, a move aimed at shoring up confidence in consumers considering buying from the automakers.
GM meanwhile confirmed Wagoner's immediate resignation early Monday and said he would be replaced by Fritz Henderson, the company's current president and chief operating officer.
Obama said the woes of the sector are "not the fault of all the families and communities that supported manufacturing plants throughout the generations. Rather, it is a failure of leadership - from Washington to Detroit - that led our auto companies to this point."
He also backed a plan to offer tax incentives to consumers trading in old cars for newer fuel-efficient models to boost the auto industry and help the environment.
Obama said he would support an idea endorsed by several members of Congress - an "ambitious incentive program to increase car sales while modernising our auto fleet."
"Such fleet modernisation programs, which provide a generous credit to consumers who turn in old, less fuel-efficient cars and purchase cleaner cars have been successful in boosting auto sales in a number of European countries," he said.
- AFP