President Barack Obama said today his administration is giving General Motors and Chrysler more time to work with creditors and unions to make concessions to fundamentally restructure in a way that would justify an investment of additional tax dollars in the companies.
The extension is limited, although Mr. Obama didnt set a deadline. The original deadline for federal assistance was March 31.
It will require creditors to recognize that they cannot hold out for the prospect of endless government bailouts, Mr. Obama said in a speech about the auto companies. He also said that auto workers and unions who have already made painful concessions (will have) to do more.
GM has not satisfied the terms of its loan agreement with the Treasury Department, which required modifications in labor, VEBA and bond agreements, a White House statement said.
The administration is offering GM and Chrysler 60 days of working capital. The administration provided no new amount under consideration for General Motors, although the company has sought $16.6 billion in additional federal assistance.
For Chrysler, the administration also would consider providing $6 billion in new capital, depending on the outcome of a proposed deal with Fiat, a White House statement said.
The administration has reluctantly concluded that Chrysler is not viable as a stand-alone company, said the White House statement.
Chrysler and its parent, Cerberus Capital Management, and Fiat have reached agreement on the framework of a global alliance, a Chrysler statement today said.
While we recognize that we still have substantial hurdles to resolve, Chrysler is committed to working closely with Fiat, the administration, U.S. Treasury and the (administrations auto) task force to secure the support of necessary stakeholders, the Chrysler statement said.
Further information was unavailable from Chrysler.
But restructuring may mean using our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger, Mr. Obama said.
GM, in a statement in response to Mr. Obamas speech, said, During the next 60 days, GM will address the tough issues to improve the long-term viability of the company, including the restructuring of the financial obligations to the bondholders, unions and other stakeholders. Our strong preference is to complete this restructuring out of court. However, GM will take whatever steps are necessary to successfully restructure the company, which could include a court-supervised process.
Roger Kerson, spokesman of the United Auto Workers, couldnt be reached for comment.