Obama Administration To Chrysler, GM: Sorry, You Failed.
In accordance with the March 31st deadline for evaluating the restructuring plans of the bailed out automakers, President Obama is expected to address the nation today to present his administration's findings — and the news isn't too sunny for the automakers.
In a 6-page PDF, the administration explained that neither company's plan was "sufficient to justify a substantial new investment of taxpayer resources," but that each company would be given a short period of additional time to fix their problems. For Chrysler, the situation is clearly more dire, as the administration's plan includes a required merger with Fiat. The two companies have 30 days to work it out in order to qualify for an additional $6 billion in loans from the government. If they can't — Chrysler is on its own.
The administration says:
General Motors: 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 will include 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. In this context, 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.
Chrysler: 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.
The administration went on to describe the process by which the car companies could be returned to viability — including offering warranty support so that consumers would feel confidant buying a automobile during the restructuring.
Meanwhile, Ousted GM CEO Rick Wagoner is trying to remain positive. "GM is a great company with a storied history. Ignore the doubters because I know it is also a company with a great future," he said in a statement.
Obama Administration New Path to Viability for GM & Chrysler [via CSPAN]
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Comments:
So maybe we shall see Fiat 500s in the US?
@Joewithay: only if this goes through, if not, then maybe through Penske Automotive Group (distributor of the Smart).
Fiat? Is that a pun on fiat currency? Not very funny. :(
It's great how people that don't know a lick about private enterprise -- let alone the car business -- can judge that companies aren't viable. :-(
@balthisar: The people doing the judging very much do though, which is why the report to Obama was so damning.
And it doesnt take an idiot to see why. For all the pandering GM has been doing, they have done NOTHING. They talked a huge game of restructuring, but they have not done a damn thing to do it yet while still hemorrhaging money.
Chrysler has been even worse. They have basically gone the route of whoring it's self out hoping someone, ANYONE will buy them and solve their woes. Other than that, nothing.
I feel like a better picture for this story would have been the GM and Chrysler logos with "EPIC FAIL" written over them.
So, you "failed," but we're giving you another boatload of taxpayer cash, anyway?
This is going pretty much as expected.
I think Chrysler is the sale of just 3 or 4 Dodge Nitros and a Chrysler Sebring or two away from total solvency.
I don't know much about the auto industry. I have however driven GM and Chrysler's cars and I can confirm that the Gov't assessment is correct.
Can they add another stipulation that if either of these companies pull through, they be forced to be split into smaller, more manageable manufacturers along whatever lines the administration feels will maintain the stability and profitability that the original behemoths are seeking?
I won't tread the "'too big to fail' motto has failed us" line. I just feel that propping up giganto-corporations, however necessary that is, is encouraging oligopolistic conditions in the future. With more foreign cars on our shores, that may not happen. I'd still rather see 12 American car giants than 3 American car titans.
(In all honesty, I get that it might be disastrous. Safety, emission, fuel economy, and other standards are so rightfully regulated now that the status quo is probably more sustainable than smaller start-ups or spin-offs. I'm just pondering.)
It's do sad that the government has to hold these companies hands like this. I wish I could have felt positive about the time they were given to "restructure". However anyone who has worked in a large corporation knows the lines of bullshit run so deep that its hard to get anything done.
I'm interested to see who takes over. I'm guessing it will be someone who wants to focus on making green cars that no one will buy (or be able to afford), but at least we will all feel good.
I'm a little conflicted with GM. The management had every opportunity in the past and was well ahead of everyone with the EV1, and then they threw it all away (watch "Who Killed the Electric Car?"). Management has made disastrous decisions leading up to this, and labor has been none too helpful/overpaid. On the other hand, the labor has made some concessions as to their current salary, and is it really fair to ask the workers to give up their pensions after they put in 30 years with the company when "we" are providing "sweetheart" taxpayer backed loans (with only 20% upfront) to these banks to clear off their "toxic debt" AND providing tax-payer backed TARP funds/loans to pay off these Credit Default Swaps (which are really just bad bets-no assets) at full face value (no concessions at all)?
I'd be all for that except that a modern car platform is expensive and takes years to develop and is often spread to as many chassis as possible to mitigate the cost in as short of a time as possible.
"The management had every opportunity in the past and was well ahead of everyone with the EV1, and then they threw it all away "
So, a failing car company could have rescued itself it only it had produced more of a car it lost huge amounts of money on?
@balthisar: Who should we get to make the decisions for our lawmakers?
1) Foriegn auto makers that have been successful.
2) My mechanic down the street Mike, who does wonderful work by the way.
3) Maybe these companies can oversight themselves!
4) We turn this into a reality show with a mixture of ex-auto execs, former sitcom stars, and Henry Kissinger.
5) Ron Paul!!1
@Bladefist: Considering that right now they make cars that no one will buy, feeling good will be a net plus.
@balthisar: Well, here's a good test to see if the plan is viable or not: let them try it on their own. If they go out of business, it's not a good plan. If they saty in business, good plan. Leave tax dollars out of it.
@balthisar: I agree. This whole thing is ridiculous. Of all the people to criticize a private company for inefficiency, our federal government should be LAST on the list. No one in America is less efficient than the government. No one.
The American public has already declared GM a failure by refusing to buy their cars and sustain their failed business process. The market has already told GM they failed. Why did our government sink billions of OUR MONEY into a company that had already been proven a failure?
Fuck em. Let em burn. The produce crap anyways.
Sounds like nationalization to me. That is a bad thing.
@jasonof2000: You are making a false assumption that each company needs to have full vertical integration.
Smaller car companies succeed quite well with modern cars by focusing on one component of the car industry vertical. One of the reasons for failure of the big 3 is due to their total vertical integration which by its very nature introduces quality issues by eliminating competition.
But... But... But... The Volt!
Too big to fail = Too big to exist.
I hope the same happens to AIG. Better to lose the billions we've spent than to keep dumping money into a hole.
I personally love the fact that the president is 'talking down' to the blue-collar companies, finger wagging, etc -- yet white-collar companies, like AIG are giving keys to the taxpayers checkbooks.
good job nardelli.
Home Depot
Chrysler
who can he fuck up next?
@calacak: Obama is talking down to the white collar execs at the auto companies, not the blue collar workers. He has said on many occasions that he respects the hard work and dedictaion that the blue collar workers exhibit.
@posaune: Err, government is not always inefficient. If it was then why are people complaining about government functions being outsources (within the US)?
@Radoman: Actually Obama flat out said today neither company is too big to fail. Making me think they already have plans to help both spin down if in fact bankruptcy is the only option.
Fritz Henderson will take over for Wagoner. At least for now. Another dinosaur from the old days at GM when they could tell the customer to fuck off. Hard to predict what color cars he will favor.It doesn't really matter,anyway. GM doesn't make a small car worth buying ,so they can't grow customers and nurture them with reliability and efficiency so that they will come back.
It sounds impossible ,but Chrysler is even worse.They have been passed around from the Americans to the Germans back to the Americans and soon a big hunk to the Italians that they have no idea what they are any more.They have even fucked up the Jeep line of vehicles.
How on earth could the governmnet mak this train wreck any worse ?
@calacak: actually he's going after executives in BOTH groups.
The problem is people spin going after the problems in the group, as going after the group as a whole.
@noone1569: How is Fiat going to help Chrysler? Don't they have a reputation worse than American cars? (Fix It Again Tony)
On Chrysler:
How hard is it to make a small car? I mean, is it so hard they have to ally themselves with another company to make one? The smallest thing they have is the Caliber (I think). Compared to their last small car (the Neon), this thing is a behemoth. Every one of their other cars is either huge, gigantic, or needs its own zip code. If they can't even TRY to offer the public what they want ( a small/decent sized family car that is at least DECENT with gas, if not a simple "get you from point A to B" vehicle), maybe it is really time for them to go the way of the dodo like AMC before them. Even GM has a few offerings in that area...
@posaune:
Which smaller car company that sells in the US develops it's own frame that isn't used by another car either by another company or in another car it sells itself?
@balthisar: I was under the impression that GM and Chrysler went to the government and admitted they weren't viable.
Now, viable if you give us enough money that it doesn't matter what we do is pretty much the same thing as dead.
The whole Fiat/Chrysler thing is just another desperation ploy. The 500 is about the only Fiat model that would stand a chance here,and that is based on novelty value alone. They are not practical,mainstream cars. And Fiat has already proven that it can't sustain any success because they do not have quality in their DNA. Whenever sales start tanking,they initiate a few "quality programs" to tide them over and then go back to building shabby cars. ( Just like Chrysler )
A "near death" experience won't do it this time.Chrysler needs to go away for good as a lesson to the survivors that the customer is still king.
While no one I know has applauded Chrysler's efforts, here one potential for them. Fiat wants a 35% stake in the company. Daimler currently still maintains an 18.5% share in Chrysler (which, interestingly enough, Daimler values at $0). Fiat gets their 35% share, then shortly thereafter acquires Daimler's share for a 53.5% ownership. When that happens, the Chrysler and Dodge nameplates either disappear completely or become niche brands under Fiat.
GM is harder to figure. If forced in Chapter 11, each brand might be sold off to other companies. (Ford, while struggling less, might see this as an opportunity to kill part of their competition through acquisition.) Or could GM contract to 2 divisions - maybe just Chevrolet and Cadillac. Another possibility is that GM could be bought by a major Asian automaker (perhaps Tata from India or Geely or Chery from China).
GM and Chrysler may yet surprise us and emerge from this, but it sure appears doubtful.
The same toughlove needs to be used with AIG the next time the go begging. I'm sick and tired of too big to fail.
American consumers are like teenage boys. They say they like a girl for her personality, but really want the hot girl with the great body. We claim we want small cars and green vehicles, but once gas prices fell, we stopped buying them. The reason American car companies don't have great small cars, is no one wants to buy them in great numbers. As a business decision, it made sense to make SUV's and bigger cars, since that is what consumers wanted. Toyota, Honda, and the like have small cars because they make them in the rest of the world. The reason brands like Lexus exist, is because to make money in the states, they had to make bigger cars.
A Smart car might be viable in Long Beach or Seattle, but when you live in Fargo or Durant, OK, they are not practical. Take joy in the demise of American car makers if you like, but it really is a sad time for America.
@Parapraxis: He could always run for president under the republican ticket in 2012. His damage capacity would be endless.
@chrisjames: Do not question that motto, it is too big to fail. If we must, we will make these companies bigger until they actually are too big to fail- the creation of CompuGlobalHyperMegaNet is my motto bailout plan.
Wow, this is a pretty hard line. Awesome. Chrysler could really use some of the Fiat tech. . .