Auto plans rejected; Obama sets conditions

President Barack Obama asserted unprecedented government control over the auto industry Monday, bluntly rejecting turnaround plans by General Motors Corp. and Chrysler LLC, demanding fresh concessions for long-term federal aid and raising the possibility of quick bankruptcy for either ailing auto giant.

Obama took the extraordinary step of announcing the government will back new car warranties issued by both GM and Chrysler, an attempt to reassure consumers their U.S.-made purchases will be protected even if the companies don’t survive.

“I am absolutely committed to working with Congress and the auto companies to meet one goal: The United States of America will lead the world in building the next generation of clean cars,” Obama said in his first extended remarks on the industry since taking office nearly 10 weeks ago. And yet, he added, “our auto industry is not moving in the right direction fast enough to succeed.”

Obama, flanked by several administration officials at the White House, announced a short-term infusion of cash for the firms and said it could be the last for one or both.

Chrysler, judged by the administration as too small to survive, got 30 days’ worth of funds to complete a partnership with Fiat SpA, the Italian manufacturer, or some other automaker.

GM got assurances of 60 days’ worth of federal financing to try and revise its turnaround plan under new management with heavy government participation. That would involve concessions from its union workers and bondholders. The administration engineered the ouster of longtime CEO Rick Wagoner over the weekend, an indication of its deep involvement.

“Sixty days isn’t going to solve everything,” said John Revitte, an MSU labor and industrial relations professor. “The administration is going to be waiting on a lot of details from both, especially Chrysler, and more plant closures are likely and it is definitely a disappointing thing to people in Michigan and the Midwest region.”

Obama said 400,000 industry jobs have been lost in the past year alone, many in Michigan.

Under Fritz Henderson, GM’s newly named CEO, the automaker issued a statement saying it hopes to avoid bankruptcy, but will “take whatever steps are necessary to successfully restructure the company, which could include a court-supervised process.”

Obama said bankruptcy would be a way for either GM or Chrysler to “quickly clear away old debts that are weighing them down so they can get back on their feet.”

“What I am not talking about is a process where a company is broken up, sold off and no longer exists. And what I am not talking about is having a company stuck in court for years, unable to get out,” he said.

Revitte said both companies have “a lot of work to do.”

“It is surprising that the government is so deeply involved with the situation,” he said. “It’s uncharted waters and it will be interested to see where things go.”

The Associated Press and staff writer Pat Evans contributed to this article.