GM and Chrysler Fail To Prove Viability; Wagoner Out at GM, Chrysler May Be Left For Dead
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The Obama Administration announced that the viability plans submitted by GM (NYSE: GM) and Chrysler were not sufficient to justify substantial new investment by the taxpayer, however both will be given a little extra time to either prove viability in the case of GM and, in the case of Chrysler, to strike a deal with Fiat. As part of the continued failure, GM's Chairman and CEO Rick Wagoner was forced out. The Administration indicated that the best chance at success may well require utilizing the bankruptcy code in a "quick and surgical way".
Instead of letting the two fall into bankruptcy right away, the Administration is giving GM 60 days worth of working capital to develop a more aggressive restructuring plan and a credible strategy to implement the plan. The Administration has concluded that Chrysler is not viable as a stand-alone company, but said a deal with Fiat could make it viable. The Administration will provide Chrysler with working capital for 30 days to conclude a definitive agreement with Fiat and will consider investing up to the additional $6 billion requested by Chrysler to help this partnership succeed.
To support vehicle purchases, the Administration will stand behind new cars purchased from GM or Chrysler during this period through an innovative warrantee commitment program.
Due to the move to remove Rick Wagoner as Chairman and CEO, Kent Kresa will serve as interim Chairman and current President Fritz Henderson will serve as CEO.
Ford (NYSE: F), which did not receive bailout funds, is down 5% in pre-open trading. While Ford did not receive any government funds, in the past they said a bankruptcy of GM or Chrysler could mean they may need government assistance due to the disruption in its business. So far, Ford has been able to survive on its own merits, which has helped the perception of the company and has already contributed to market share gains.
Instead of letting the two fall into bankruptcy right away, the Administration is giving GM 60 days worth of working capital to develop a more aggressive restructuring plan and a credible strategy to implement the plan. The Administration has concluded that Chrysler is not viable as a stand-alone company, but said a deal with Fiat could make it viable. The Administration will provide Chrysler with working capital for 30 days to conclude a definitive agreement with Fiat and will consider investing up to the additional $6 billion requested by Chrysler to help this partnership succeed.
To support vehicle purchases, the Administration will stand behind new cars purchased from GM or Chrysler during this period through an innovative warrantee commitment program.
Due to the move to remove Rick Wagoner as Chairman and CEO, Kent Kresa will serve as interim Chairman and current President Fritz Henderson will serve as CEO.
Ford (NYSE: F), which did not receive bailout funds, is down 5% in pre-open trading. While Ford did not receive any government funds, in the past they said a bankruptcy of GM or Chrysler could mean they may need government assistance due to the disruption in its business. So far, Ford has been able to survive on its own merits, which has helped the perception of the company and has already contributed to market share gains.
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