UPDATE: Obama: 'Viable' Plan Gives GM Chance To Rise Again
02 June 2009 - 3:47AM
Dow Jones News
President Barack Obama said Monday that General Motors Corp.'s
(GM) restructuring plan provides it an opportunity to emerge
quickly from bankruptcy as a stronger company, but warned that
fixing the troubled auto maker will take a "painful toll" on many
Americans.
"Working with my auto task force, GM and its stakeholders have
produced a viable, achievable plan that will give this iconic
American company a chance to rise again," Obama said in remarks at
the White House.
"I will not pretend the hard times are over," he added.
"Difficult days lie ahead. More jobs will be lost. More plants will
close. More dealerships will shut their doors, and so will many
parts suppliers."
The government will inject another $30 billion into GM to help
it get through the bankruptcy process, an investment that will pump
the government's ownership position in the company to 60%. Obama
repeated that the government is a "reluctant shareholder" with no
interest in running the company's day-to-day operations.
But critics say the government's position as majority
shareholder in the post-bankruptcy GM creates a conflict between
its duty to help the company return to profitability so that it can
repay taxpayers and its goal of creating more fuel-efficient
vehicles to lessen the nation's dependence on oil.
House Republican Leader John Boehner, R-Ohio, called the
administration's policies "conflicting and counterproductive."
"It's time for the administration to fully explain what the exit
strategy is to get the U.S. government out of the board room once
and for all," Boehner said.
Obama defended government loans to GM and Chrysler as necessary
to stave off a collapse that would have been "devastating" for the
U.S. economy.
"Understand we're making these investments not because I want to
spend the American people's tax dollars, but because I want to
protect them," Obama said.
U.S. Chamber of Commerce President Thomas Donohue said his group
is concerned that GM's new owners in Washington could put politics
ahead of sound business decisions.
"If members of Congress, along with government officials from
the United States to Germany to Canada, are allowed undue influence
over management's decisions, then you can write this down: These
companies will not return to profitability and their survival will
be seriously challenged," Donohue said in a statement.
Obama was speaking hours after GM filed for protection in New
York and as Chrysler LLC prepared to emerge from its own
bankruptcy. He said GM - larger and more complex than Chrysler -
would likely come out of the process "quickly," but not as rapidly
as Chrysler.
He hailed Chrysler's emergence from a "quick, surgical"
bankruptcy as "dramatically better than what appeared likely when
this process began."
In addition to the U.S. government's 60% stake, Canada and
Ontario will own a 12% position in GM. The remaining shares will go
to the United Auto Workers and bondholders.
Obama said none of GM's stakeholders are receiving special
treatment, saying that the United Auto Workers is making "painful
sacrifices, on top of all that they've already done."
He said unsecured bondholders, who agreed to swap $27 billion in
debt for up to 25% of GM's equity, will recover "substantially
more" than they would have without government help or if the
company had been liquidated.
"I instructed my auto task force to treat all of GM's
stakeholders fairly and to ensure that this restructuring was
carried out in a way that was consistent with past precedent. And
it was," Obama said.
-By Henry J. Pulizzi, Dow Jones Newswires; 202-862-9256;
henry.pulizzi@dowjones.com