GM's new CEO, Fritz Henderson will have 60 days to restructure the automaker, which could still receive additional aid.
Both General Motors and Chrysler have reportedly failed to convince the White House that they can survive in current form, leading Pres. Barack Obama to order GM to restructure, during the next 60 days, and its cross-town rival to complete a proposed alliance with the Italian automaker Fiat, within 30 days, according to overnight reports out of Washington.
Failing to meet those short-term targets, the White House would let both makers fail, according to reports.
On Monday morning, at 11 AM EDT, the President will issue a formal response to the request for an additional $21.6 billion in federal loans the two U.S. makers claim they need to survive. But while he is expected to provide some financial assistance, it will fall short of their request and require significant additional sacrifices by GM and Chrysler.
The first such step was announced overnight by GM, which belatedly confirmed reports, leaked from the White House, that Chairman and CEO Rick Wagoner would step down.
Chrysler CEO Bob Nardelli will have to find a way to forge an alliance with Fiat -- fast.
“On Friday I was in Washington for a meeting with administration officials,” Wagoner said, in a post placed on the GM corporate website. “In the course of that meeting, they requested that I ‘step aside’ as CEO of GM, and so I have.”
He is being replaced, as chief executive, by his second-in-command, current General Motors President Fritz Henderson. GM Board of Directors member Kent Kresa, chairman emeritus of Northrop Grumman Corporation, will serve as interim non-executive chairman.
But Wagoner’s departure is likely to be only the first step in the process of restructuring that Obama is expected to demand of GM, according to numerous overnight reports.
After reviewing the recommendations of his automotive task force, the president has determined that GM will get some so far-unspecified “interim financing” – on top of the $13.4 billion it has already received, but not the $16.6 billion it had been requesting. That interim aid is meant to provide the automaker enough time to seek additional concessions from the United Auto Workers Union, bondholders and other stakeholders in the company.
While the automaker has received billions of dollars in union givebacks, the concessions were not considered enough, and bondholders, in particular, have so far resisted demands to swap debt for equity.
During a 60-day window, the administration would determine how much additional aid the company would need to survive. It will remain an option that the White House could subsequently push GM into bankruptcy, though a Chapter 11 filing does not appear to be required, at least initially, as part of the forced restructuring.
As for Chrysler, the Washington reports indicate the president did not view it as a viable, standalone company. But the White House intends to encourage the automaker to forge a partnership with the Italian automaker, Fiat SpA – an option Chrysler proposed as part of its bid for an additional $5 billion in aid. In fact, the President will now provide up to $6 billion to make that partnership work – but Chrysler would be denied more cash if it cannot complete the deal with Fiat during the next 30 days.
The U.S. maker has stated that the alliance would be worth $10 billion to it in the form of new technology, hardware and an expanded global distribution network. Fiat, in turn, would gain access to the critical U.S. market it long ago abandoned.
Final details won’t be released until Monday’s White House announcement, but the president signaled his position during a Sunday interview on the CBS program, “Face the Nation,” during which he said, “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.”
Both General Motors and Chrysler have reportedly failed to convince the White House that they can survive, leading Pres. Barack Obama to order GM to restructure, during the next 60 days, and its cross-town rival to complete a proposed alliance with the Italian automaker Fiat, within 30 days, according to overnight reports out of Washington.
On Monday morning, at 11 AM EDT, the President will issue a formal response to the request for an additional $21.6 billion in federal loans the two U.S. makers claim they need to survive. But while he is expected to provide some financial assistance, it will fall short of their request and require significant additional sacrifices by GM and Chrysler.
The first such step was announced overnight by GM, which belatedly confirmed reports, leaked from the White House, that Chairman and CEO Rick Wagoner would step down.
“On Friday I was in Washington for a meeting with administration officials,” Wagoner said, in a post placed on the GM corporate website. “In the course of that meeting, they requested that I ‘step aside’ as CEO of GM, and so I have.”
He is being replaced, as chief executive, by his second-in-command, current General Motors President Fritz Henderson. GM Board of Directors member Kent Kresa, chairman emeritus of Northrop Grumman Corporation, will serve as interim non-executive chairman.
But Wagoner’s departure is likely to be only the first step in the process of restructuring Obama is expected to demand of GM, according to numerous overnight reports.
After reviewing the recommendations of his automotive task force, the president has determined that GM will get some so far-unspecified “interim financing” – on top of the $13.4 billion it has already received, but not the $16.6 billion it had been requesting. That interim aid is meant to provide the automaker enough time to seek additional concessions from the United Auto Workers Union, bondholders and other stakeholders in the company.
While the automaker has received billions of dollars in union givebacks, the concessions were not considered enough, and bondholders, in particular, have so far resisted demands to swap debt for equity.
During a 60-day window, the administration would determine how much additional aid the company would need to survive. It will remain an option that the White House could subsequently push GM into bankruptcy, though a Chapter 11 filing does not appear to be required, at least initially, as part of the forced restructuring.
As for Chrysler, the Washington reports indicate the president did not view it as a viable, standalone company. But the White House intends to encourage the automaker to forge a partnership with the Italian automaker, Fiat SpA – an option Chrysler proposed as part of its bid for an additional $5 billion in aid. In fact, the President will now provide up to $6 billion to make that partnership work – but Chrysler would be denied more cash if it cannot complete the deal with Fiat during the next 30 days.
The U.S. maker has stated that the alliance would be worth $10 billion to it in the form of new technology, hardware and an expanded global distribution network. Fiat, in turn, would gain access to the critical U.S. market it long ago abandoned.
Final details won’t be released until Monday’s White House announcement, but the president signaled his position during a Sunday interview on the CBS program, “Face the Nation,” during which he said, “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.”