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Seven Days: Vermont Car Blog

April 03, 2009

Washington Takes Tough Stand Against Automakers

President Obama announced this week that the government is rejecting the turnaround plans by General Motors and Chrysler, and has denied both automakers more long term federal aid based on the viability plans that they presented late last year. The president also implied that bankruptcy is a very real possibility for one or both of the companies. The two Detroit automakers have to date received over $17 billion in federal aid and have been under the magnifying glass to illustrate sustainable operations.

In an effort to regain consumer confidence, president Obama also announced that the government will insure new car warranties issued by GM and Chrysler even if the companies dissolve. Obama has stated that the goal of congress and US automakers is to “lead the world in building the next generation of clean cars” and that currently the American auto industry “is not moving in the right direction fast enough to succeed.”

Deemed as too small to survive on its own, Chrysler was granted 30 more days of federal funding to reach an agreement with Italian automaker Fiat, or another automaker. Fiat and Chrysler had been working on a proposal where Chrysler would receive small car technology, transmissions, and other manufacturing techniques  and in exchange Fiat would assume 35 percent stake in Chrysler.

General Motors was granted 60 additional days of federal funding to revise its turnaround strategy. As part of the negotiations, GM’s long time CEO Rick Wagoner was forced to resign from his position and walk with a $23 million pension plan. In quick response, GM has introduced a new assurance package similar to the successful approach by Hyundai. In the event of a new car purchaser being laid off or fired within the first two years, GM dealerships will cover as many as 9 car payments worth up $500 each. GM calls the program Total Confidence and it is available through April 30.   

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