GM's and Chrysler's best chance at success "may well require utilizing the bankruptcy code in a quick and surgical way."
In a draft of the key points of the upcoming auto announcement that TheDetroitBureau.com has obtained, the Obama Administration has concluded that “the plans submitted by GM and Chrysler on February 17, 2009 did not establish a credible path to viability,” according to the Auto Task Force.
“In their current form, they are not sufficient to justify a substantial new investment of taxpayer resources,” the Administration concludes.
As a result each company will have 30 or 60 days to revise their plans. They will be given an “adequate amount of working capital” to establish a new strategy for long-term economic viability.
While GM’s “current plan is not viable, the Administration is confident that with a more fundamental restructuring, GM will emerge from this process as a stronger more competitive business.”
This process includes leadership changes at GM and an increased effort by the U.S. Treasury and outside advisors to assist with the company’s restructuring effort. Rick Wagoner is stepping aside as Chairman and CEO. The Administration will provide GM with working capital for 60 days to “develop a more aggressive restructuring plan and a credible strategy to implement such a plan. The Administration will stand behind GM’s restructuring effort.”
After extensive consultation with financial and industry experts, the Administration has “reluctantly concluded that Chrysler is not viable as a stand-alone company. However, Chrysler has reached an understanding with Fiat that could be the basis of a path to viability. Fiat is prepared to transfer valuable technology to Chrysler and, after extensive consultation with the Administration, has committed to building new fuel efficient cars and engines in U.S. factories. At the same time, however, there are substantial hurdles to overcome before this deal can become a reality.”
Therefore, the Administration “will provide Chrysler with working capital for 30 days to conclude a definitive agreement with Fiat and secure the support of necessary stakeholders. If successful, the government will consider investing up to the additional $6 billion requested by Chrysler to help this partnership succeed. If an agreement is not reached, the government will not invest any additional taxpayer funds in Chrysler.”
While Chrysler and GM are “different companies with different paths forward, both have unsustainable liabilities and both need a fresh start. Their best chance at success may well require utilizing the bankruptcy code in a quick and surgical way.”
“Unlike a liquidation, where a company is broken up and sold off, or a conventional bankruptcy, where a company can get mired in litigation for several years, a structured bankruptcy process – if needed here – would be a tool to make it easier for General Motors and Chrysler to clear away old liabilities so they can get on a path to success while they keep making cars and providing jobs in our economy.”
The Administration will also stand behind new cars purchased from GM or Chrysler during this period through an innovative warrantee commitment program.
The Administration will also announce that Edward Montgomery, a top labor economist and former Deputy Secretary of Labor, will serve as Director of Recovery for Auto Workers and Communities. Dr. Montgomery “will work to leverage all resources of government to support the workers, communities and regions that rely on the American auto industry.”
Statement from GM of Europe: Today’s announcement from the U.S. Administration affirms that GM will emerge from the present restructuring stronger, leaner and more competitive globally. The news that GM is being strongly backed by the government only strengthens the resolve of the GM European operations in reinventing every part of its business.
While this announcement also comes with the urgent message that much work remains and that changes were needed, the situation for GM Europe’s viability planning remains largely unaffected. Constructive and significant talks on restructuring our labor costs are progressing, as is the dialogue to gain government support.
The U.S. government has also been kept updated by the German government on the progress of the European restructuring discussions.
Importantly, the initial outreach for third-party investors has been very promising. We expect that Opel/Vauxhall will emerge a significantly more independent part of a strong global GM product network as we navigate these very difficult economic times.
Key Points for Europe:
1)The commitment of the U.S. Administration to stabilize GM’s future represents a positive development for GM Europe’s restructuring
• While difficult measures are being implemented, the statement that “The Administration will stand behind GM’s restructuring effort” gives clear signal that GM’s effort to reinvent the business can and will succeed
2)GM Europe continues normal operations and is not directly included in the U.S. actions
• GM Europe customers can rely on their service and warranty, as they always have
• Vehicle parts suppliers and employees to be paid in the normal course of business
• Dealers, warranty and customer support operations unaffected by the announcement
3)GM Europe continues to aggressively work to reinvent its business model
• While GME is not included in the U.S. process, work continues in earnest on reinventing and restructuring the European operations
• Good progress is being made in discussions with government and labor on the necessary actions to achieve viability – but much work remains
• Initial outreach to third-party investors has been promising, but GM Europe must achieve its benchmarks for labor restructuring and liquidity as soon as possible
THE ANSWER IS THROW EM IN THE BIN (Ode to Big Auto)
(Blowing in the Wind, Bob Dylan)
WilliamBanzai7
Sing along: http://www.youtube.com/watch?v=ced8o50G9kg
How many times must Big Auto beg for cash
Before you tell them to scram?
Yes, n how many bailout bucks must get squandered and trashed
Before they seep into the Arabian sand?
Yes, n how many gas hogs should we allow to drive by
Before theyre forever banned?
The answer, my friend, is throw em in the bin,
The answer is throw em in the bin.
How many times must the bondholders cry
Before we explode their bailout pie in the sky?
Yes, n how many inches must John Dingell’s nose grow
Before he can admit its a huge sham?
Yes, n how many Prius’ and Lexus’ must we buy
Before we admit MOTOWN died long ago?
The answer, my friend, is throw em in the bin,
The answer is throw em in the bin.
How many years can Detroit’s unionized brontosaurs persist
Before their washed to the sea?
Yes, n how many years can General Motors clunkers exist
After all they’re rusty and cheap.
Yes, n how many times can Joe Consumer turn his head,
Pretending he just doesnt see?
The answer, my friend, is throw em in the bin,
The answer is throw em in the bin.