President Barack Obama on Monday said U.S. automakers General Motors and Chrysler will require further restructuring to receive additional government aid.
In a press conference at the White House, Obama, flanked by members of his Cabinet, detailed the measures the administration is imposing on the struggling companies following the evaluation of his auto industry task force.
The U.S. government will give GM working capital for 60 days but has demandedfrom GM bondholders, union workers, and management. Rick Wagoner was asked to step aside as CEO and will be replaced by Frederick "Fritz" Henderson.
In its evaluation, the U.S. government found Chrysler less financially viable. An additional $6 billion loan is contingent on Chrysler striking a partnership with Fiat or another automaker in the next 30 days.
In his comments, Obama made clear that the administration considers fuel-efficient vehicles integral to revitalizing U.S. automakers.
"I am absolutely committed to working with Congress and the auto companies to meet one goal: the United States of America will lead the world in building the next generation of clean," Obama said. He noted that many American-made companies, including GM, have made significant advances in producing fuel-efficient cars.
The administration determined that bankruptcy is one possible way to restructure GM quickly, although Obama said he opposes a drawn-out legal proceeding or dismantling the company. "What I am talking about is using our existing legal structure as a tool that, with the backing of the U.S. government, can make it easier for General Motors and Chrysler to quickly clear away old debts that are weighing them down," he said.
To allay concerns of potential buyers, Obama announced that the U.S. government will "stand behind" warranties of GM cars starting on Monday.
"Let me be clear: the United States government has no interest or intention of running GM. What we are interested in is giving GM an opportunity to finally make those much-needed changes that will let them emerge from this crisis a stronger and more competitive company," he said.
Demands for fuel efficiency also figure into Chrysler's potential tie-up with Italy's Fiat, which is prepared to transfer its technology to Chrysler and build fuel-efficient cars and engines in the U.S., Obama said.
Other measures include a lending program at the Treasury Department to ensure a flow of credit to dealers and consumers and a tax incentive that will allow consumers to deduct sales and excise tax on vehicle purchase.
Obama also said he favors a "fleet modernization program" now being considered by Congress and operating in Europe where consumers have an incentive to turn in older cars to purchase more efficient new ones.