Monday March 30, 10:27 AM
GM, Chrysler have no 'viable' plans: US task force
WASHINGTON, (AFP) - General Motors (NYSE: GM - news) and Chrysler have failed to lay out viable plans for their ailing companies, the White House said Monday, in a tough review which could shake up the nation's key auto industry.
In two separate reports, a task force set up by President Barack Obama analyzed the future prospects for both companies and warned they had failed to comply with the terms of a 17.4 billion dollar government bailout.
Obama is due to unveil his plan for the future of the key industry at 11:00 am (1500 GMT) Monday with both companies seeking an additional 21.6 billion dollars to survive the economic downturn which has sent global car sales plunging.
The task force concluded both companies had failed to meet the conditions for the bailouts by a March 31 deadline, and as a result neither company had "satisified the terms of its loan agreement."
GM and Chrysler had warned without extra funds they were teetering on the brink of bankruptcy and had been charged with coming up with viability plans to show the path to profitability.
Those plans required deeper job cuts, new agreements with unions to slash costs and acceptance by bondholders of a plan to cut the automakers' debt.
In the case of GM, the task force noted that while the company has made meaningful progress in its turnaround plan, "the progress has been far too slow" and it continued to lag behind its competitors.
"As a result, the president?s designee has found that General Motors? plan is not viable as it is currently structured," the report said.
However, the experts expressed confidence that "there could be a viable business within GM" if the company and its stakeholders engage in a "substantially more aggressive" restructuring plan.
The findings were grimmer for Chrysler, which the task force said had a "fundamentally disadvantaged operating structure and a limited set of desirable products make standalone viability for the business highly challenging."
Its recovery plan was "not viable as currently structured."
However, the task force said if Chrysler could develop a partner which would bolster its product development and allow it to enter the small car market, "Chrysler has some prospects for long term viability."
The reports came as the White House confirmed that Obama had asked GM chief Rick Wagoner to step down.
GM confirmed Wagoner's immediate resignation early Monday and said he would be replaced by Fritz Henderson, the company's current president and chief operating officer.
In a message posted by the company's website, Wagoner said he had been requested to resign in talks on Friday in Washington with Obama administration officials.
The shakeup at the company was expected to continue. GM Chairman Kent Kresa said the company?s restructuring "will likely cause a significant change in the stockholders," and the board intended to nominate a new slate of directors for its next annual meeting.
Ford, the other member of Detroit (DETROIT.SN - news) 's Big Three, has said it has enough cash to survive the downturn without government aid.
Obama warned Sunday that the automakers needed to do more to earn a larger government handout.
"They're not there yet," Obama told CBS (NYSE: RBV - news) television. "We think we can have a successful US auto industry. But it's got to be one that's realistically designed to weather this storm and to emerge at the other end much more lean, mean and competitive than it currently is."
"There's been some serious efforts to deal with a combination of long-standing problems in the auto industry and the current crisis, which has seen, you know, the market for new cars drop from 14 million to nine million," Obama said Sunday.
But he added that to ride out the crisis there had to be "sacrifices from all parties involved, management, labor, shareholders, creditors, suppliers, dealers.
"Everybody's going to have to come to the table and say it's important for us to take serious restructuring steps now in order to preserve a brighter future down the road," the president said.
US auto sales extended their downward spiral in February, falling 41 percent from a year ago to the lowest rate since December 1981 amid a deepening economic crisis. And some analysts say March sales could be equally bleak.
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