Obama: U.S. auto industry must lead on 'clean cars'

President Barack Obama on Monday said U.S. automakers General Motors and Chrysler will require further restructuring to receive additional government aid.

In a press conference at the White House, Obama, flanked by members of his Cabinet, detailed the measures the administration is imposing on the struggling companies following the evaluation of his auto industry task force.

President Obama announces initial findings of the government's auto industry task force.

(Credit: Screen capture by Martin LaMonica/CNET)

The U.S. government will give GM working capital for 60 days but has demanded additional concessions from GM bondholders, union workers, and management. Rick Wagoner was asked to step aside as CEO and will be replaced by Frederick "Fritz" Henderson.

In its evaluation, the U.S. government found Chrysler less financially viable. An additional $6 billion loan is contingent on Chrysler striking a partnership with Fiat or another automaker in the next 30 days.

In his comments, Obama made clear that the administration considers fuel-efficient vehicles integral to revitalizing U.S. automakers.

"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. He noted that many American-made car companies, including GM, have made significant advances in producing fuel-efficient cars.

The administration determined that bankruptcy is one possible way to restructure GM quickly, although Obama said he opposes a drawn-out legal proceeding or dismantling the company. "What I am talking about is using our existing legal structure as a tool that, with the backing of the U.S. government, can make it easier for General Motors and Chrysler to quickly clear away old debts that are weighing them down," he said.

To allay concerns of potential buyers, Obama announced that the U.S. government will "stand behind" warranties of GM cars starting on Monday.

"Let me be clear: the United States government has no interest or intention of running GM. What we are interested in is giving GM an opportunity to finally make those much-needed changes that will let them emerge from this crisis a stronger and more competitive company," he said.

Demands for fuel efficiency also figure into Chrysler's potential tie-up with Italy's Fiat, which is prepared to transfer its technology to Chrysler and build fuel-efficient cars and engines in the U.S., Obama said.

Other measures include a lending program at the Treasury Department to ensure a flow of credit to dealers and consumers and a tax incentive that will allow consumers to deduct sales and excise tax on vehicle purchase.

Obama also said he favors a "fleet modernization program" now being considered by Congress and operating in Europe where consumers have an incentive to turn in older cars to purchase more efficient new ones.

[biffhenerson]

Cha-Ching! Like Ross Perrot once said when speaking about NAFTA, "Can ya hear the giant sucking sound?" Except this time it is the government sucking on my wallet, bank account, home equity, and retirement. The inflation the government will introduce in the comming years will make the US dollar worthless. Oh yeah you might have $100 saved up but that is what a candy bar will cost. Government butt out! Let them fail rather than bring down the entire nation!

[iptofar]

The Government is so good at running things....<br /><br />Is it the intention of this gov't to get the raw end of every deal they enter into?

[aj37viggen]

Listen, you complainers, at least this has sort of a chance of working. GM is making a lot of good cars now, they're just taking a hosing on insuring all their retirees. (Toyota's and Honda's US plants will be in the same fix when they've been in business long enough.) I don't know about Chrysler/Fiat, but at least it's interesting.<br /><br />You should consider yourselves lucky they didn't appoint Michael Moore as car czar... which one hundred percent of the forum posters at New York Times Online probably would think is a wonderful idea! (Of course, they all live in NYC and none of them own cars... except one guy upstate who tried to convert a Merc 220D to biodiesel, but lost interest and decided to build a bong instead...)

[Renegade Knight]

GM makes crap. That's why they are in the tank. If you take a beancounter and let them make a car you get a car that's as exciting as counting beans. That's GM's fundamental problem. <br /> <br />The other issue is pensions. (we agree here) Most non american companies use 401K or other retirement plans that don't create legacy costs for buyers and workers that jack up the price of the car. The American Companies were saddled with these costs. Fix that and you give them a much better chance. Hence, Toyota and Honda won't be in the same position. <br /> <br />Same issue played out in American Steel. When the companies went bankrupt, Executives bought the assetts and started over sans pensions.

[DarkHawke]

That's exactly why GM SHOULDN'T have taken, let alone lobbied for, a government bailout. If (and perhaps now, when) they go into Chapter 11 bankruptcy, they could scrap the union contracts that make their cars so much more expensive to produce than even Japanese cars made domestically. The government bailout is in fact a union bailout, as it keeps those contracts in force, keeps an unsupportable manpower situation going as well as the same kind of retirement program as Social Security, which will bankrupt the U.S. government in a very short span of years. Honda and Toyota don't have union bosses breathing down their necks, so they'll never be in these straits, unless they lose their corporate minds or something. <br /><br />And having the government force GM into producing cars nobody wants is a classic case of throwing good money after bad. There would have been a good deal of pain had exactly NO bailouts of ANY company occurred, but now those companies are going to fail BECAUSE of all the governmental intervention brought on by the bailouts and the ensuing pain will be exponentially worse! If anyone in the government REALLY had a clue about how to run a company, wouldn't they be doing that instead?

[Lerianis3]

DarkHawke, get real. Most of the people on the assembly lines have been in the business 20+ years and are earning only 20 dollars an hour. The unions are NOT the problem in the slightest. Lack of innovation, lack of will, etc. are what are causing all the problems at GM and Chrysler, not the unions. <br />Secondly, the work force doesn't 'force' GM and the others to do JACK ****! The only people who have ANY input on what the factories build: the designers of the cars and upper management, most of whom are NOT unionized at all.

[freemarket--2008]

Lerianis3: You don't have a clue.<br /><br />From: http://wsjclassroom.com/archive/06may/auto2_jobsbank.htm<br /><br />"Each person costs GM around $100,000 to $130,000 in wages and benefits, according to internal union and company figures"

[RetiredMidn]

The Obama administration is making government assistance contingent on GM building cars the administration wants them to make, not (necessarily) that the public wants to buy. Somebody pointed out recently that GM has many models with decent fuel efficiency (30 MPG or better), but the lines haven't been profitable. <br /><br />This is a recipe for disaster, with our tax dollars. I'd rather GM went the Chapter 11 route and got it over with.

[Renegade Knight]

Good catch. It's not about building the perfect green car but abou building what's going to sell. Today that's high fuel economy cars. Tomorrow? Toyota has the bases covered. All the bases. GM keeps leaving holes that burn them when the trends shift.

[ausernamenoonehaschosen]

This is exactly what I thought too. Let the market tell them what to make, not the governement.

[Lerianis3]

Personally, I have to agree with Obama about forcing them to build fuel-efficient cars, trucks and SUV's. If some people WORKING IN THEIR FREAKING GARAGE can get an SUV up to 100 miles per gallon or more...... why can't GM and the others? Doesn't make sense, and I think that GM and it's competitors will have to be roasted over hot coals before they do that.

[unknown unknown]

Obama is just determined to sock it to the tax payers. I supported him during the election but now I am wondering if he's not going to be remember as a worse president than Bush. The guy has added trillions to deficit in the space of 3 months. So much for change you can believe in.<br /><br />If people do not want to buy GM's cars now, I doubt they're going to want buy the over priced, under powered clean cars.

[Shabizzle]

FYI, the GOP plan runs up the deficit also but too bad we dont know how much cuz their plan is short on specifics. <br /><br />I surely have no interest in buying a GM car myself. Their brand image is really bad right now.

[mattumanu]

I love how they are putting on these stipulation for the automakers, but as for the banks and securities systems, it's a free for all.

[ausernamenoonehaschosen]

It's strange that they aren't holding GM and Chrysler to the same requirements. With this plan it sounds like GM may survive, but Chrysler is in trouble. It is very likely that, considering how negotiations have gone with Fiat so far, Chrylser will not get the agreement that the WH is looking for, at which point they are history. If Chrysler goes down, the orders for parts from the manufacturers will drop significantly, which in turn will cause them to fall as well. If the parts manufacturers fall, then the GM will be hurting much worse since these are the same people who make parts for them. If GM can't get the car parts they need, then restructured or not, they're screwed.

[kts2oo1]

I'm intrigued as to why people would be upset about this? Obama is trying to find ways to decrease our dependence on foreign oil. One of the ways to do that is to push the US automakers to create cars that depend on using less gas.<br /><br />And I'd venture to say that the the reason why the clean tech cars haven't been popular to date is because the manufacturers (like GM) haven't had any incentive to make them enticing. Hell, if I had the money, I'd buy a Tesla right now. GM has better resources to mass produce cool cars at an inexpensive price... they just chose not to because it would have (initially) negatively affected their bottom line. In addition, the kickbacks they get form the oil companies would have gone the way of the do-do bird.<br /><br />I think this is a good plan. You guys have to remember, Obama's only been in office for 100 days. It took Bush 8 years to get us in to this mess; the clean up is not going to happen fast and it's not going to be cheap. We're not going to get out of this mess by not spending money.

[SactoGuy018]

I agree 100%! :-) <br /> <br />Look, today's fuel-efficient cars aren't the boring "stripped down" tin boxes of old. Go to Europe and take a look at the new Ford Fiesta (the latest version came out last year to great acclaim). VERY stylish in design, reasonably roomy, handling that would shame most "sports" cars of even ten years ago, surprising amount of inteirior amenities and of course with pretty good fuel economy (with Prius-like fuel economy if Ford decides to bring their Duratorq turbodiesel engines to the US model). Is it small wond er why Ford doesn't want the bailout money, because they already have the lineup of vehicles that America wants nowadays?

[Lerianis3]

Both posters hit the nail on the head. The fact is that those 'econo-boxes' that they sell overseas aren't so much an econobox anymore. CD players (6 CD at that!), roomy interior for 4 adults and a child (5 small adults), plush seats, etc..... if I could, I would buy a car made overseas or sold overseas in a heartbeat.

[TogetherinParis]

The United States is solely and completely responsible for this economic crisis. When the red Chinese dictators capriciously decided that they needed to wring more billions from their slave population (according to Forbes Magazine they increased their holdings of US money by 38% during the second half of last year), our federal reserve decided NOT to supply the world economy with enough currency to accommodate the reds. Why? Who knows their reasons, the whole world now knows they are incompetent. So now, instead of properly supplying the money, money itself is rising in value. Our manipulations make friendly currencies hold their own, but the poor countries' currencies inflate in comparison to the dollar--which continues to deflate! <br />The fed must buy weak foreign currency. The fed must buy mortgage backed securities--their collateral is illiquid that is their only real sin. It's land in America. What could possibly be safer than that? The fed must buy small percentages of many securities across the board and accept those assets for the federal treasury. They can be sold to counter inflation when the time comes. Prices for homes have fallen because the dollar deflates, not because the market has 'collapsed' and our federal reserve is entirely responsible. The federal reserve must do its job and stop quibbling. Get on with it. And they could stop sloshing around so much too, with extravagant announcements. Just work little by little every day. Titrate efforts to AVOID the damped driven oscillations that foment economic catastrophe! Am I the only competent economist on this planet or what?

[Seaspray0]

or what.

[nmcphers]

TogetherinParis, <br />It sounds like you copied and paste a response to one of your econ homework questions.

[Commander_Spock]

Re: "[...Am I the only competent economist on this planet or what?...]"<br /><br />How about looking at things from a political angle.... if the troops were not sent into Iraq; and, if all the things that you have mentioned did not happen as far as the U. S. Economy was concerned: Do you think that America would have had its first African-American President!!!<br /><br />"Mission Accomplished" - Again!<br /><br />Btw, What's ERR?

[Commander_Spock]

Also; "The United States is solely and completely responsible for this economic crisis. When the red Chinese dictators capriciously decided that they needed to wring more billions from their slave population (according to Forbes Magazine they increased their holdings of US money by 38% during the second half of last year),..."<br /><br />Guess what, with the Chinese, the Indians, the Iranians, the North Koreans, Pakistan.... all trying to acquire nukes as well as increasing the debris fields in outer space... "The Concorde" is sitting on an Old Aircraft U. S. Aircraft Carrier in New York's Hudson River. Well, let the world wait and see what happens when they all "consume" their own production (Baby Milk Formulas, Leaded Toys, Pet Foods...included).

[rp69]

If they build it we will come. Start building Hydrogen powered engines and I will take serious consideration into buying a GM auto. <br /><br />To demonstrate how out of touch GM is ... they are touting their Cadillac Escalade Hybrids with bringing 20 MPG Highway ... they just don't get it and its why they are in the situation that they're in. They need to re-tool themselves and steer that sinking battleship to land before its too late. Government is setting mandates because they feel entitled now that GM and Chrysler are begging for billions. Serves them right. <br /><br />Don't feel sorry for them as I wrote to GM 5 yrs ago asking them to build alternative fueled vehicles like that in South America. There response was essentially stating that the demand is not there and they are already building the most fuel efficient vehicles. The rest is history. RIP GM.

[Commander_Spock]

This article in part reads; "[...In its evaluation, the U.S. government found Chrysler less financially viable. An additional $6 billion loan is contingent on Chrysler striking a partnership with Fiat or another automaker in the next 30 days....]"<br /><br />So, why stop at the "financial analysis" and not complete the "economic and technical analyses" that would produce multi-year projection. And, these are what are needed to be done for the entire engineering economy of the United states of America. But, then again, are the "skills set" available in the United States of America; or, will these have to be acquired through "H-1B" Visas" or through "Outsourcing" to India, China, Italy....!

[bgnm]

People seem to conveniently forget that this is not a GM problem, it is a auto industry problem with roots in the speculative oil price run-up. Toyota's and Honda's and Nissan's sales are down almost as much as GM's, but they have their exorbitantly priced home market and huge hidden subsidies to help keep them afloat. The US industry's unique problem is the high cost of its pensions and irrational unions. But does anyone expect the Obama administration to run afoul of their union allies? Furthermore, no one in the administration has ever actually run a business, let alone one the size of GM. The treasury secretary cannot even manage his tax return! The administration's hubris is astounding. With the possible exception of the Carter administration, it would be hard to find a president who has mishandled so much in such a short time.

[SactoGuy018]

However, Toyota and Honda will weather this better because their overhead costs are way lower than even GM and the fact both Toyota and Honda offers models a lot of people want--why do you think the Toyota Yaris and Corolla and Honda Fit and Civic are still selling fairly well even now?<br /><br />Like I said earlier, Ford will end up being the big winner in this. Their incredible luck in getting financing for product development in 2006 has resulted in the enormous success of the new version of the Ford Fiesta (coming to the USA the beginning of 2010), and Ford's expertise in hybrid drivetrains is only bettered by Toyota. Indeed, by 2011 don't be surprised that Ford will become the #1 US automaker because of their decision to develop stylish small cars everybody wants and automobiles with trully effective hybrid drivetrains.

[Lerianis3]

That's partially true. Obama wants them to make VERY fuel efficient cars because he doesn't want the problems with 150 dollar a barrel oil to be happening again..... but he forgets that run-up can be DIRECTLY linked to speculators and others out of control, with no government regulation of the industry.

[youngjm]

If he wants us to drive green cars then create the demand and manufactures will meet it. Don't create something that not everyone wants. Choice is going going....Gone!

[smallvoice]

Now is not the time to fire people. Now is the time to support each other as much as we can so that all of us could recover from this seeming financial difficulty. All we need to do is what the people did in the State of North Dakota. That is - work together and encourage one another. We all have been wrong. Killings in Carthage, North Carolina, killings in Santa Clara, California, beheading a 5-year old girl by her brother, brother stabbing his two sisters do death in Milton, Massachusetts. These are not merely co-incidents. These are a direct result of leaving God out. First thing first. Abandon ungodly agenda such as embryonic stem cell research, abortion, homosexuality, assisted suicide, etc. Restore Bible and prayers at public schools. This is not a so-called establishment of religion. Establishment is ?Convert or else ? .? At least since John F. Kennedy struck down the Bible at schools, the United States began losing its strength. There will be no recovery unless we get down on our knees and bow before God. The following is just a small example. Instead of pulling ourselves together to defend people such as Mr. John Yoo and Mr. Attorney General Alberto Gonzalez who risked their own safety for the American people, the United States is cutting itself out to foreign invasion by openly welcoming their legal jurisdiction. America helped and defended other nations with its own sweat and blood, and is still doing it. I am breathing right now because of such blood sacrifice by US and its allies. All these international organizations were formed and supported by the US initiatives. The United Nations, for example is a hindrance to us Americans. It is our fault in the final analysis, because we, the American people, have fallen from God?s instruction. I believe that, during the World War II, Spain was one of the nations the United States and its allies protected from the genocide schemes. The United States and its allies saved their life. How unthankful is this act of accusing people who tried to prevent a genocide scheme ? Islamic or other murderous terrorists from committing genocide. We became so accustomed to killings of fellow men that ?genocide? means only Jewish Holocaust? scale killings. Such Holocaust must be considered as not even mentionable. The United States acted after the 9/11 attacks on the US soils. The reaction was preserve and protect not only the citizens of the United States but also the citizens of other law abiding and common-sense based countries. Look up the Convention on the Prevention and Punishment of the Crime of Genocide articles 2 and 3. http://fletcher.tufts.edu.multi/texts/BH859.txt. These terrorists expressly declared that their intent is to destroy ?infidels? such as the United States and Israel, for example. So, even under this Convention, these terrorists are harboring and cherishing in their hearts prosecution of genocides against any group or number of people who do not bow to their religion. You don?t just watch a 16-year-old girl, for example, being raped at a knife?s point. You will come to the rescue of that girl. The United States did just that. These lawyers, including Mr. Yoon, did just that. People should be thankful to them for what they did. Do you think that the victims of 9/11 were of a lower class people? No. It could have been any of us. 9/11 attacks were a brutal and beastly act. We are compelled to abrogate the ordinary ? let?s face it; no crime is ordinary - criminal procedures applied to cases of day-to-day criminal prosecutions. You do not know how many murderous genocidal plots have been thwarted or prevented by the efforts of the United States directly or indirectly in the US or else where, even in Spain. Mr. Yoo is a true lawyer ? a person with legal knowledge with his mind set on protecting the lives of others. His vision of any ?unthinkable? happening must have guided his writing his legal opinions. As to the treaty or treaties, when a person acts in such a dangerous and harmful way, then it is justified to conclude that that person no longer deserves a right or rights normally provided. The more serious or imminent the danger, the more rights will have to be taken away. We cannot use, for example, ?probable cause? or ?reasonable suspicion? standard in these cases handling terrorist suspects. We cannot use ordinary method of investigation in such circumstances. These are investigations into mass killings amounting to genocide. Common sense jurisprudence calls for removal of people from the bench such as Judge Baltasar Garzon, if Spain desires to be considered as a civilized nation based on common sense and common humanity.

[Suchy21]

Why is there no mention of Aptera? They actually have a solution, it is affordable, and it uses a bit of the same technology that GM throws into Corvettes.<br />See: http://www.aptera.com/<br /><br />Additionally, much of the technology to make cars more fuel efficient doesn't involve new fuels! By reducing weight, rolling resistance, and most importantly aerodynamic drag, any car can achieve higher fuel efficiency!<br />Just check out what Car and Driver could do with a Pinto 34 years ago:<br />http://ecomodder.com/blog/11-on-mods-plus-new-tires-car-and-driver-improves-mpg-by-25/<br /><br />For the extremes in fuel efficiency, see www.uksolarcar.com and www.americansolarchallenge.org. These cars can do 55+mph using less than 5 HP.