Obama Auto Task Force Gives GM 60 days to Restructure

With only one day before GM and Chrysler were supposed to submit updated viability plans to the government, Obama’s auto task force has decided that both automakers’ actions have not been drastic enough.

Changing GM’s leadership was one of the items on the task force’s “to do” list. This included making GM’s CEO Rick Wagoner resign from the company at the treat of withholding more bailout money. Board member Kent Kresa will take the place of interim chairman and Chief Operating Officer Fritz Henderson will act as interim chief executive officer. The task force noted that it would replace most of the board of directors in the coming months.

The dreaded word –”bankruptcy” — was brought up again as possibly the company’s “best chance for success.” According to the task force says, if a bankruptcy is needed, it will be a short-term “surgical” bankruptcy undergone with the government’s support. This structured bankruptcy process would be a tool to make it easier for the company to clear away old liabilities.

GM’s dealings with its bond holders had yielded little or no progress according to the Obama administration. The task force also said that GM’s plan to shrink or sell four of its eight brands didn’t go far enough.

To ease the concerns of buyers who may become reluctant to buy a vehicle from GM or Chrysler, the government is creating a program to guarantee the warrantees of vehicles purchased from the two companies indefinitely. The program will be partially funded by GM and Chrysler and the rest will be covered by the government. It will only go into effect if the companies are no longer able to satisfy the warrantees.

GM will have 60 days to prove its viability. During this time period the company will receive an undisclosed amount of government aid. If the company does not convince members of the auto task force that it can return to profitability, it will be forced into bankruptcy.

Source: The Detroit News