White House questions viability of GM, Chrysler

White House sets tough deadline to force overhaul of ailing US carmakers

• Philip Elliott, Associated Press Writer
• Monday March 30, 2009, 8:17 am EDT

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WASHINGTON (AP) -- President Barack Obama is sending a blunt message to Detroit automakers: To survive -- and win more government help -- they must remake themselves top to bottom. Driving home the point, the White House ousted the General Motors chairman as it rejected GM and Chrysler's restructuring plans.

AP - In this June 26, 2008 file photo, then Democratic presidential candidate, Sen. Barack Obama D-Ill., left, talks with ...

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Obama is set to elaborate on that message when he announces Monday what his White House told reporters over the weekend: Neither GM nor Chrysler submitted acceptable plans to receive additional federal bailout money.

GM chairman Rick Wagoner became the most conspicuous casualty of that decision, forced out Sunday as the White House indicated Detroit must make management and other changes if it hopes to survive -- and that the Obama administration will have a hands-on role in those changes. GM and Chrysler employ thousands in Ohio, the No. 2 state for vehicle production.

Michigan Gov. Governor Jennifer Granholm said Monday that Wagoner "clearly is a sacrificial lamb" who stepped aside "for the future of the company and for the future of jobs." She spoke on NBC's "Today" show.

Neither GM nor Chrysler is viable and deeper sacrifices must be made, the White House indicated Sunday, setting the stage for a crisis in Detroit that will dramatically reshape the nation's auto industry.

In a last-ditch effort, the administration has given company a short-term deadline to try one last time to persuade Washington that it is worth saving, said senior administration officials who spoke on the condition of anonymity to more frankly discuss the decision.

In an interview with CBS' "Face the Nation" broadcast Sunday, Obama said the companies must do more to receive additional financial aid from the government.

"We think we can have a successful U.S. auto industry. But it's got to be one that's realistically designed to weather this storm and to emerge -- at the other end -- much more lean, mean and competitive than it currently is," Obama said.

Frustrated administration officials said Chrysler cannot function as an independent company under its current plan. They have given Chrysler a 30-day window to complete a proposed partnership with Italian automaker Fiat SpA, and will offer up to $6 billion to the companies if they can negotiate a deal before time runs out.

If a Chrysler-Fiat union cannot be completed, Washington plans to walk away, leaving Chrysler destined for a complete sell-off. No other money is available.

Shawn Morgan, a Chrysler spokeswoman, said the company wants to work with the Treasury Department and Obama's auto task force but declined to comment on the White House's plans.

"With the administration's announcement on the restructuring of the automotive industry imminent, it would be inappropriate to comment on speculation," Morgan said in a statement early Monday.

For GM, the administration offered 60 days of operating money to restructure. A frantic top-to-bottom effort began Sunday after chairman and CEO Wagoner stepped aside under pressure from the White House.

Fritz Henderson, GM's president and chief operating officer, became the new CEO, the company said in a statement Monday. Board member Kent Kresa, the former chairman and CEO of defense contractor Northrop Grumman Corp., was named interim chairman of the GM board.

In a major management shake-up, new directors will make up the majority of GM's board, the automaker said.

"The board has recognized for some time that the company's restructuring will likely cause a significant change in the stockholders of the company and create the need for new directors with additional skills and experience," Kresa said in a written statement.