WASHINGTON – President Barack Obama refused further long-term federal bailouts for General Motors and Chrysler, saying more concessions were needed from unions, creditors and others before they could be approved. He raised the possibility Monday of
WASHINGTON – President Barack Obama refused further long-term federal bailouts for General Motors and Chrysler, saying more concessions were needed from unions, creditors and others before they could be approved. He raised the possibility Monday of controlled bankruptcy for one or both of the beleaguered auto giants.
At the same time, eager to reassure consumers, Obama announced the federal government would immediately begin backing the warranties that new car buyers receive – a step designed to signal that it is safe to purchase U.S.- made autos and trucks despite the distress of the industry.
In a statement read at the White House, Obama said he was “absolutely committed” to the survival of a domestic auto industry that can compete internationally. And yet, “our auto industry is not moving in the right direction fast enough,” he added.
With his words, Obama underscored the extent to which the government is now dictating terms to two of the country’s iconic corporations, much as it has already taken an ownership stake in banks, the insurance giant AIG and housing titans Fannie Mae and Freddie Mac.
In an extraordinary move, the administration forced the departure of Rick Wagoner as CEO of General Motors over the weekend, and implicit in Obama’s remarks was that the government holds the ability to pull the plug on that company or Chrysler.
Uncertainty about the industry’s fate sent stocks tumbling, with the Dow Jones industrial average losing as much as 300 points in midday trading.
Ford Motor Co., the third member of the Big 3, has not requested federal bailout funds and was not included in the president’s remarks.
All three automakers employ thousands in Ohio, the No. 2 state for vehicle production after Michigan.
The Bush administration late last year approved $17 billion in federal funds to help GM and Chrysler survive. It also demanded both companies submit restructuring plans that the Obama administration would review.
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