For the Automakers, No Cash Until More Conditions Are Met
President Obama today made official what had been leaked over the weekend: That the viability plans submitted last month by Chrysler and General Motors don’t go far enough to satisfy the administration, which is asking the ailing automakers for further restructuring as a condition of receiving more bailout funding.
We cannot, we must not, and we will not let our auto industry simply vanish. [...]
But after careful analysis, we have determined that neither [plan] goes far enough to warrant the substantial new investments that these companies are requesting. And so today, I am announcing that my administration will offer GM and Chrysler a limited period of time to work with creditors, unions, and other stakeholders to fundamentally restructure in a way that would justify an investment of additional tax dollars; a period during which they must produce plans that would give the American people confidence in their long-term prospects for success.
Among those conditions, General Motors CEO Rick Wagoner has been pushed out, and Chrysler will be required to finalize its plan to merge with Fiat — a deal that appears to be imminent.
Two notable elements of Obama’s speech today: First, the president did mention that the blame for the automakers’ troubles shouldn’t be pinned on the auto workers, but on “a failure of leadership — from Washington to Detroit — that led our auto companies to this point.” This was a not-so-veiled reference to the regional protectionism that found some of Washington’s most powerful Democrats literally defending Detroit’s automakers to death.
And second, he didn’t mention that the frozen credit markets that have largely contributed to the fall in car sales won’t be thawed without first stabilizing housing markets — a piece of the financial recovery that Congress seems willing to leave for last, despite the fact that it was the housing crisis at the root of the global economic meltdown.
Then again, consumers don’t have the lobbying prowess of Wall Street.