From NBC's Athena Jones
A failure of leadership from Washington and Detroit is to blame for the crisis facing American automakers, President Obama said today when he announced that neither GM nor Chrysler had shown they could remain viable without government help.
The White House is giving both companies more time to restructure before the administration agrees to commit more taxpayer money to helping them. "We cannot and must not and we will not let our auto industry simply vanish," Obama said, calling the industry a source of deep pride.
But he also insisted that the government cannot continue to excuse poor decisions. "These companies -- and this industry -- must ultimately stand on their own, not as wards of the state."
GM, whose Chairman and CEO Rick Wagoner is stepping down at the administration's request, will get 60 days of working capital to develop an aggressive restructuring plan. Wagoner will be replaced by Fritz Henderson, the current president, while Kent Kresa will serve as interim Chairman.
Obama said the government would provide Chrysler with adequate working capital for 30 days so that it can work to complete an already discussed merger with Italian automaker Fiat, which if successful could give it access to up to $6 billion in additional government aid. (Shortly after the president's remarks, Chrysler announced a deal had been struck with Fiat and private equity firm Cerberus Capital Management LP on a global alliance, though it said there were still "substantial hurdles" that had to be resolved.)
The president said a structured bankruptcy process that would use the bankruptcy code "in a quick and surgical way" could be necessary to help both companies improve their balance sheets. The government will back the warranties of any new cars purchased from the companies during any restructuring.
Obama has repeatedly declared his commitment to the U.S. auto industry, but has said it must be one that can build the clean energy cars of the future and better compete with foreign carmakers -- something that will require extensive restructuring and modernization, hard choices and painful concessions from workers and bondholders, as well as new vision and new direction. Still, he acknowledged that vast numbers of American workers rely on the auto industry and talked about the pain already being faced by people in big car-producing states like Michigan, where more than one in 10 are unemployed.
Speaking directly to the men and women of the industry, Obama reprised some of the populist rhetoric he adopted to help woo working class voters during the campaign. He said he understood many had been going through tough times for a long time and that while there could be more tough times ahead, he would fight for them.
"I got my start fighting for working families in the shadows of a shuttered steel plant and I wake up every single day asking myself what I can do to give you and working people all across this country a fair shot at the American dream," Obama said.
To help communities tied to the auto industry, the administration is appointing Ed Montgomery, a former deputy Labor secretary, as director of recovery for auto companies and workers. Montgomery will work with governors and Congress to help direct emergency support to and boost economic development in affected regions.
Montgomery was present at today's announcement, along with other top officials like Treasury Secretary Tim Geithner, Transportation Secretary Ray LaHood, Biden economic adviser Jared Bernstein, White House chief economist Larry Summers, OMB Director Peter Orszag, Energy Secretary Steven Chu, and Christina Romer, the chair of the White House Council of Economic Advisers.
When pressed about how the tough talk and firm deadlines the administration has set for the two automakers compares with the way banks are being dealt with -- for instance GM's chief was asked to step down but the same can't be said for the executives of banks that have received billions in taxpayer help -- White House Press Secretary Robert Gibbs argued that each company should be looked at individually.