General Motors and Chrysler LLC will each be given capital and time to accelerate their attempts to restructure and survive, according to a government aid plan set for release today.
GM also confirmed earlier reports that Rick Wagoner has stepped down at the request of the administration. He will be succeeded as CEO by COO Fritz Henderson. Board member Kent Kresa, chairman emeritus of Northrop Grumman Corp., will be interim non-executive chairman of the GM board.
A government official, who asked not to be identified because the plan would not be announced by President Barack Obama until today, said GM will be given 60 days to determine the best path forward.
Chrysler will be given 30 days to complete a proposed alliance with Italy's Fiat SpA. If the deal is successful, the government could extend up to $6 billion in new assistance.
The official did not say how much capital each company would receive over the next several weeks, and did not indicate what long-term financing GM might receive if it shows that a turnaround plan can be successful. Chrysler has said it needs additional funding as soon as Tuesday to avoid a cash crisis. GM has previously said it needs more than $2 billion for April. GM has asked for more than $16 billion in new government loans, while Chrysler wants $5 billion to ride out the weakest U.S. market for new cars in almost 30 years. Ford, which is also struggling, is not seeking federal help. Wagoner was the second car executive to lose his job on Sunday. The board of France's PSA Peugeot Citroen fired CEO Christian Streiff and replaced him with Philippe Varin, who will take up the position on June 1. Peugeot last month posted a $460 million net loss and said it expected to stay in the red until 2010. "Mr. Wagoner has been asked to resign as a political offering despite his having led GM's painful restructuring to date," said U.S. Rep. Thaddeus McCotter, a Michigan Republican and member of the House Financial Services Committee. Said Rebecca Lindland, director of IHS Global Insight: "We had feared the Obama administration may force some of the executives out. But we don't really see how this would make GM the better, stronger company that Obama wants it to be." John Casesa, a managing partner at New York-based consulting firm Casesa Shapiro Group said: "GM lost its footing in the late 1970s and the board didn't seem to notice for another 20 years. Rick made a lot of decisions, but they came too late," GM and Chrysler have run through most of the initial rescue money and are at risk of bankruptcy without immediate help. The government has said it does not want to push GM or Chrysler into bankruptcy, although some analysts believe that is the only way to truly restructure the companies. Wagoner had been outspoken in his opposition to a Chapter 11 reorganization, saying it would drive away consumers and probably lead to GM's liquidation. But neither automaker has finished the cost-cutting overhaul dictated by the terms of their December bailout launched by the Bush administration that set a March 31 deadline for determining whether the companies can be saved. |
Source: Automotive News
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