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Inaction is not an option. Here is a transcript from the President of the United Automobile, Aerospace and Agricultural Implement Workers of America:


UAW President Ron Gettelfinger

Press conference on America’s auto crisis

November 20, 2008


Good afternoon everyone. First of all let me thank you for coming on short notice. We did want to have the opportunity to further our media message during what we consider to be a crisis in the auto industry. Allow me to begin first of all, to introduce the Secretary-Treasurer, Elizabeth Bunn; Bob King as you know is our V. P. of Ford; Cal Rapson, General Motors; General Holiefield is the V.P. of Chrysler.


You know we did have a couple of exciting days in Washington, I don’t know if any of you were able to make it, but it was quite an experience. We really appreciated the opportunity. The opportunity to go there and tell the story of the auto industry because there are a lot of misconceptions out there. But the purpose of us gathering together today is that it is critically important the Bush Administration and Congress reach some agreement to take action to provide immediate assistance to the domestic auto companies.


Both the Bush Administration and Congressional leaders agree that immediate assistance is needed, and the cost of not acting could be devastating both to workers and to retirees in the industry and to millions of workers and to other retirees across this country and to our entire economy. And while there have been disagreements about the precise mechanism for providing assistance to the auto industry, surely it should be possible to work out an agreement on how to proceed.

Inaction is simply not an option. Without immediate assistance, we could see a collapse of one or more of the domestic auto companies by the end of this year. The costs that would flow from this are simply too great. You’ve heard the numbers: three million jobs, we have a million retirees, spouses and dependents, that would be losing possibly their pension and/or their health care benefits.


The federal Government would be saddled with huge pension and health care costs. Thousands of other businesses, suppliers, dealers and others depend on the auto industry would be in trouble. The current recession that we are in would be made much worse with revenues to federal, state and local governments dropping forcing cuts to public programs.


And to prevent those devastating consequences, the Bush Administration and Congress need to act now to provide an emergency bridge loan to the domestic companies. To at the very least to enable these companies to continue operations until the Obama Administration can put in place a long-term plan to move the industry forward. Congress must not adjourn without an agreement with the Bush Administration to move forward with an emergency rescue plan for the domestic auto companies.

Allow me to say that during the debate that was heard in Washington, we’ve heard a lot about competitiveness, we haven’t heard a lot about people. We throw out the figure the impact on three million people. Let’s go to the competitiveness piece of it first of all.


Since 1992, states where we have transplants have located have put in over $3 billion dollars in incentives and I would point out that is the money that the state settled for and I want to go specifically to Alabama if I could for a minute. We have Hyundai Motor Company that got $252 million in incentives. Toyota there got $29 million in incentives. Honda, $158 million and Mercedes $253 million in incentives. It just seems odd to us that we can help the financial institutions in this country and that we can offer incentives to our competitors to come here and compete against us but at the same time, we are willing to walk away from an industry that is the backbone of our economy.


And while I read these figures to you, which are the actual figures that we have been able to dig up. I want to go to one particular story and that is the plant in Mercedes, the Mercedes plant in Alabama.


As it turned out, as I said Alabama offered $253 million but the state offered to train the workers, clear and improve the sites, upgrade the utilities, buy 2,500 vehicles and it is estimated that that incentive package totaled somewhere around $175,000/per employee to create those jobs there. And on top of this, that state gave this automaker a large parcel of land-around $250-$300 million dollars. That was the same price or cost to them of building a facility.


So we can support our competition but we can’t support an industry that is in need? And this need was not brought about because of what the industry has done. I have heard some clamoring for management to resign. OK, let’s just go back and look at the facts. First of all, will that fix the problem? I don’t know; if it does, then let Congress put that as a stipulation.


But I would only call your attention to the fact that we concluded negotiations last year with General Motors. Their stock was over $42 a share. What’s happened since? We saw what happened in the sub prime, mortgages, we saw what happened in the credit crunch, we’ve watched a volatile stock market. And I am not here to defend the CEOs. My only question is, if that will fix the problem, then do away with it. But how has that driven their stock all the way down from $42 to where it is at today? That to me becomes a distraction here.


We talk about the number of vehicles that GM has as an example, that gets over 30 miles to the gallon. We have just got a lot of well-kept secrets here that we have just not been able to get out. And we understand that people want to move forward with advanced technology vehicles. We have worked so hard with the industry to make that happen. That is why we come up with the Advanced Technology Vehicle Manufacturing Incentive Program. That was approved by Congress last year and then the money appropriated this year. It is not an easy take out here. It’s a rough economy and the industry is caught up becomes the consumers are caught up.

Consumers cannot get loans that have reasonable interest rates on them and if we cannot get people in the showrooms to buy automobiles, we have got a huge problem—we have got a huge problem in this country. Our fear is that if one of these companies goes over the cliff, that for sure it could take at least one of the others if not both because of the way the supply base is interlaced with the companies. So we are here appealing to Congress and to the Administration to take action.


Now let me mention to you a bit about the contract. Again, and this is one thing that we were ready to defend in Wash. and I would simply say in this particular area, Channel 7 gave the UAW men and women Newsmaker of the Year. Auto. News did the same thing. Then we go to the Detroit Free Press and Michiganian of the Year. It was done because everybody said that the UAW sat down with management and worked out a transformational agreement.


Well, we’ve been transforming for a long time. It is not our fault that the economy is in the tank; that consumer confidence is low and what we need is a low-interest bridge loan to get us through this very difficult economic time in our country.


So, the people end of it. It is one thing for us to talk about the number of Americans that are impacted. It is another thing to see the worry that exists in active and retired members faces. To know that their jobs are imperiled and that they have a danger of losing it.


Last year we received a letter following negotiations. I have read it quite a bit and in speeches along the way but I just want to go to the very heart of it. We have a woman named Rita Pelfrey and she is drawing a surviving spouse pension and she is also drawing her pension. She lives in Toledo, Ohio. She gets a combined total of $322 a month pension from GM. Last year our VPs here were able to work out some bonuses for our retirees. I want to say to you, read a paragraph that her son, Jim Upperman wrote. He said:


“I cannot express how elated she was when she found out that retirees were going to receive a bonus check in December, 2007. She received that check for $452 and proceeded to donated 10% to charity, kept $100 for Christmas, and deposited the other $300 into a newly formed emergency account that we began for her.


Now that is what this is about. This is about a young family who are counting on these jobs so that they can provide for their children and perhaps have an education for their children in the future. It is about retirees like Rita who worry everyday about whether or not their pension check is going to come in. I just hope that one of the things that we haven’t lost here is the impact of a bankruptcy on the part of any of these companies.

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Michael Cusumano, the Sloan Management Review Professor in Management in the MIT Sloan School of Management, discusses why U.S. automakers should be allowed to fail and what it will take for them to become viable again.


Q. Do you think that U.S. automakers should be allowed to fail?


A. Yes, I think they should file for Chapter 11 bankruptcy protection under the U.S. courts and reorganize. The reason is that the decline in competitiveness of General Motors, Ford and Chrysler is a long-term problem, going back to the 1970s and 1980s, beginning with lagging physical productivity in assembling automobiles compared to the leading Japanese companies, and then in quality and also in engineering productivity for product development. I myself have done research documenting this gap (Michael A. Cusumano, The Japanese Automobile Industry, Harvard, 1985) and was involved for many years in other research undertaken by researchers affiliated with the International Motor Vehicle Program (IMVP), based at MIT and Wharton but with a research network all over the world. IMVP produced the bestseller book by James Womack, Daniel Roos and Daniel Jones, "The Machine that Changed the World" (Lawson, 1991), which documents the state of the world auto industry circa 1990 and the mounting problems of the U.S. automakers. But things have gone from bad to worse.


It is true that the U.S. automakers have improved their manufacturing productivity and quality and their product designs, but they did severe damage to their reputations in the market place during the 1970s, 1980s and 1990s by selling badly designed and manufactured products. In addition, these companies, led by GM, agreed to incredibly generous wage and benefits packages for employees and their families and retirees, despite the relative weaknesses in their competitiveness. They were always flirting with losses and so they let themselves become extremely vulnerable to the threat of strikes by the United Auto Workers union. Today, their overall costs as well as product portfolios render them noncompetitive in international competition. We can argue that Japan and European nations that have national health care systems provide an unfair advantage, and I think this is a real problem, not only for the automakers but for other companies as well. In any case, the U.S. labor contracts in the auto industry are no longer viable, and were unrealistically generous to begin with. I believe it would take a bankruptcy proceeding to restructure these agreements, like the airline industry has done.


Q. What do you think it will take to help U.S. automakers become viable again?


A. The current management of the U.S. automakers as well as the union leaders have only themselves to blame for putting GM, Ford and Chrysler in such a precarious financial predicament. We have told them for the past 20 years what was best practice in the industry and how to improve their operations, and both labor and management have been too slow to adjust. Currently, the U.S. automakers probably have about 50 percent more production capacity than they can use, because demand for their products is so low. They are only profitable in a booming market and when they can sell larger vehicles (trucks and SUVs) with large profit margins per unit. But the market reality has changed drastically and it is time to change the management of these companies as well as their labor costs and benefits structure.


I do believe that millions of Americans under the age of 60 or so are unlikely to buy an American-made car until there is overwhelming evidence that these products meet world-class standards of reliability and performance. But the prices should be right if they can get their costs down. In general, customers do respond to new products if they are truly excellent and priced right. Assuming the U.S. automakers can deliver on the design side, then, as I said before, the companies will be okay if they can restructure their costs. But also they need to change the senior management teams and bring in people who anticipate the future rather than just try to change incrementally and react in a panic when things go bad.


I also believe the U.S. government will have to help in the bankruptcy. Companies will still need financing during the reorganization period, and that will be hard to get from commercial lenders or investors. But money is one thing the U.S. treasury can provide. Also, there is considerable concern that customers will not buy vehicles from a bankrupt company because they worry about who will guarantee the warrantees or build spare parts. The airlines did not face this problem because tickets are consumed immediately when you use them. But, rather than just give money to the U.S. automakers to keep them operating, the U.S. government can provide bankruptcy financing as well as create a program to guarantee the warrantees and continued support of their products. This is a better way to spend money on the automakers. Just giving them billions of dollars now postpones the inevitable. We can't rely on the managers in these companies to change the way they think and manage. It is best to force the companies to reorganize, change the management teams and labor leaders, and do it fast.


My biggest worry is that the U.S. automakers have a major problem attracting talent. This will be very difficult to overcome. For the past 20 years, our best students at MIT, from both the engineering school and the management school, have not been joining GM, Ford or Chrysler. They have been joining companies such as Intel, Cisco, Microsoft, Hewlett Packard, Amazon, Google, etc. This is not necessarily the case in Japan or Europe, where companies such as Toyota, Honda, Nissan, BMW, Daimler-Benz (Mercedes), Volkswagon-Audi, and Renault are still seen as good or even exciting places to work. This also is not the case in Korea, China or India, which have pretty vibrant automobile industries now. I wouldn't be surprised if, within two to three years we see Chinese or Indian cars in the U.S. selling for just a few thousand dollars. All the more reason why the U.S. companies need to fix themselves and do it fast.


Q. What are the long-term economic repercussions over a potential bailout or a potential failure?


A. With bankruptcies involving companies as large as GM, Ford and Chrysler, of course there will be major economic disruptions, in many industries. Not only will many auto workers be laid off directly at these companies, but automobiles use a lot of steel, plastics, electronics, electrical good, rubber, glass, fabrics and other materials and components provided by thousands of other companies. Some of these jobs will remain at the U.S. automakers and their suppliers if the companies continue to operate in bankruptcy, which I assume they would. The foreign-owned automakers in North America (Toyota, Honda, Nissan, Hyundai, BMW) can also take up some of the slack and may rehire some of these workers and expand their own capacity. Families of retirees and laid off workers will be hurt the most as they lose their benefits. But here is where government can again play a role such as by providing unemployment insurance, retraining funds, and passing health care programs, either at the state level or the national level (Massachusetts, for example, has a new health plan at the state level).


In my view, the economic consequences will be worse in the long run for this country if we don't fix the problems of the U.S. automakers and make sure they are competitive for the future. The auto industry actually has a bright future because we will all be replacing our current vehicles someday and there are lots of exciting new developments in hybrids, all-electric vehicles, and hydrogen fuel cells. It is good to have a domestic automobile industry, but it is better to have a strong domestic automobile industry that is forward-looking and profitable both in good times and bad times.

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  • 3 weeks later...

Looks like the President is going to do something that Congress would not. What do you think?


Today, aboard Air Force One with President Bush on his way to Texas, White House spokesperson Dana Perino made the following statements:


Given the current weakened state of the U.S. economy, we will consider other options if necessary, including use of the TARP program, to prevent a collapse of troubled automakers.


Under normal economic conditions, we would prefer that markets determine the ultimate fate of private firms.


A precipitous collapse of this industry would have a severe impact on our economy and it would be irresponsible to further weaken and destabilize our economy at this time.


While the federal government may need to step in to prevent an immediate failure, the auto companies, their labor unions and all other stakeholders must be prepared to make the meaningful concessions necessary to become viable.


Congress spoke last night. They don’t have the votes to do anything. They didn’t get it over the goal line, and so we have to consider what other options we would take, but I don’t have a time frame on it.

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It is just a matter of time before the remaining TARP money goes to the Auto industry.



MS. PERINO: All right. I will have something for you on the automotive industry vote from last night in just a moment. Just a reminder that we're on our way to Texas. The President is going to be giving a commencement address at Texas A&M University. On board with us today, Congressman Jeb Hensarling, Congressman Chet Edwards, and Congressman Joe Barton. All of them are Aggies. We also have one of our favorite Aggies, Cathy Gillespie, on board with us, as well, Ed Gillespie's wife.


Kim Strassel of The Wall Street Journal is on board, and she will interview the President on this trip. The President recorded his weekly radio address this morning. In it he will talk about the administration's effort to reduce drug use -- that new data that came out this week we've talked about. Also today, ONDCP Director John Walters and actor Gary Sinise will host separate sessions of Ask the White House. Director Walters will be talking about those drug use numbers, and Gary Sinise was awarded the President's Citizens Medal -- Presidential Citizens Medal on Wednesday, and he will discuss Operation Iraqi Children and the importance of community service.


On the auto industry, I'm going to go through this for you, and then I'll take a few of your questions, and then I'm sure you'll want to do a wire call. President Bush this morning repeated that he's very concerned about the state of our weakened economy, and that he's also very concerned about the ramifications that a disorderly bankruptcy in the automotive industry could have on our economy.


It is disappointing that while appropriate and effective legislation to assist and restructure troubled automakers received majority support in both Houses, Congress nevertheless failed to pass final legislation. The approach in that legislation provided an opportunity to use funds already appropriated for automakers, and presented the best chance to avoid a disorderly bankruptcy, while ensuring taxpayer funds go only to firms whose stakeholders were prepared to make the difficult decisions to become viable, competitive firms in the future. That has been our position for some time, as those of you covering it have known.


Under normal economic conditions, we would prefer that markets determine the ultimate fate of private firms. However, given the current weakened state of the U.S. economy, we will consider other options if necessary -- including use of the TARP program to prevent a collapse of troubled automakers. A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time.


While the federal government may need to step in to prevent an immediate failure, the auto companies, their labor unions, and all other stakeholders must be prepared to make the meaningful concessions necessary to become viable.


That's all I've got.


Q What does that mean?


Q Will you start --


MS. PERINO: Meanwhile, you could relisten to your tape. (Laughter.)


Q Will you start using TARP money now? Are you going to direct the Treasury --


MS. PERINO: I didn't say that. I didn't say that. I said that given the current state of the U.S. economy, we'll consider other options if necessary, and I said including use of some of the TARP; that's one of the options.


Q How soon -- walk us through his thought process right now. Who does he need to talk to first? What decisions need to be made before he decides --


MS. PERINO: He's in regular contact with all of his economic advisors. And so we'll be weighing all of the options and making decisions as soon as we need to.


Q How soon does he feel he needs to make a decision?


MS. PERINO: We didn't discuss that. I mean, obviously we have talked about the urgency of the situation. We have been pushing to get this done; we wanted to get it done last night. Both Congress and the -- the House and the Senate had bipartisan majorities supporting our approach, but they didn't get it over the goal line. And so we have to consider what other options we would take. But I don't have a time frame on it.


Q Are you basically saying that you are going to make the decision -- it's not Congress now? I mean, basically, you are going to make the decision on what to do --


MS. PERINO: Congress spoke. Congress spoke last night. They don't have the votes to do anything, despite having majorities in both the House and the Senate supporting a reasonable approach that we put forward. We thought that the legislation could have even been improved. We thought that senators were making good progress last night and talking about the Corker amendment. But again, it just -- it didn't get the votes that it needed to pass the Senate. They needed 60; I think they had 53.


Q You mentioned the use of -- you mentioned TARP funds as one option. Are there any other options?


MS. PERINO: We're going to weigh all options. I mentioned TARP, as that's been something that you all have been asking about for weeks. And it's just one of the options that's out there, sure.


Q Can you describe the other options?




Q Is the Federal Reserve -- cash from the Federal Reserve an option?


MS. PERINO: I don't know.


Q Will the decision be made this week? I mean, it's Friday today. Or is next week --


MS. PERINO: I don't know.


Q Dana, how will the White House be working with the auto companies to determine whether they will have a viability plan or not? How will they work it out?


MS. PERINO: Well, we've been in contact with them regularly and we have been reviewing their plans, we've been actively engaged in looking -- trying to pass this legislation. And I think we'll just have to -- you're just going to have to give us a little bit of time. This vote just happened late last night. It's 8:30 a.m. this morning or 8:45 a.m. Just give us a little bit of time to look at it. But this provides you an idea of where we're headed, which is we think that the current weakened state of the economy is such that it could not withstand a body blow like a disorderly bankruptcy in the auto industry.


Q And are you satisfied with the viability plans you've seen so far?


MS. PERINO: I'll decline to comment because we haven't so far and we'll have to take another look at what they might need and how we might be able to provide that as a short-term mechanism to help prevent a disorderly bankruptcy that we think could devastate further an already very weak economy.


Q So you'd still like to see kind of some sort of bridge similar to what the Congress proposed in --


MS. PERINO: I'm not going to describe it in any other way except to say that we're looking at all the options that we could possibly look at, including the use of TARP funds.


Q Did the President meet with any staff this morning before he left, or did he talk to Mr. Paulson?


MS. PERINO: The President saw Josh Bolten early this morning. He got briefed also late last night.


Q Sorry -- this morning -- I couldn't hear. The President this morning --


MS. PERINO: He asked if he'd met with any staff.




Q Yes.


MS. PERINO: Including Josh Bolten and me and Ed Gillespie and I don't know who else, but the President is an early riser and this is important enough that he was up early talking about it.


Q Did he consult with Paulson?


MS. PERINO: I don't know if they've spoken today. I know they spoke -- they speak regularly. I think -- I know they spoke yesterday. So I don't know if they've talked today.


Q Did he have any discussions with senators, Republican senators yesterday to try to convince them or talk to them --


MS. PERINO: -- because the vote came together very late and there was a holiday reception that happened sort of right in the middle of it. And I think some people didn't think there was going to be a vote last night. I think that includes some of you. So I just don't know about that.

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The salary and benefits of the average auto worker are around $1000.00 per vehicle. It's a very simple formula. Just divide the wage, $28 ph, by 60= .47 per minute x 1000 hands on people @1 min. each (average) $470.00 per vehicle x 2 for benefits= $940.00 Take away the entire figure from the sticker price and look at your savings! God Bless America! We need it.

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Republicans would rather see no American automobile manufacturers instead of seeing auto workers across the country get paid well, have great health care benefits and excellent pensions. They would rather see foreign car manufacturers built plants across the poorer parts of the USA to depress wages of American auto workers.

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Unions had a place in the 1930's but for more than FIFTY years have been corrupt and seen to it that American companies are no longer competitive in the world market. If a person doesn't want to work for GM, he doesn't have to, and he can start his OWN company. Right? Unions are white elephants that serve THEMSELVES.

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  • 3 months later...
Guest The White House

March 30, 2009




Grand Foyer


11:07 A.M. EDT


THE PRESIDENT: Good morning, everybody.


One of the challenges we've confronted from the beginning of this administration is what to do with the state of the struggling auto industry. In recent months, my Auto Task Force has been reviewing requests by General Motors and Chrysler for additional government assistance, as well as plans developed by each of these companies to restructure, to modernize, and to make themselves more competitive. Our evaluation is now complete. But before I lay out what needs to be done going forward, I want to say a few words about where we are and what led us to this point.


It will come as no surprise that some Americans who have suffered most during this recession have been those in the auto industry and those working for companies that support it. Over the past year, our auto industry has shed over 400,000 jobs, not only at plants that produce cars, but at the businesses that produce the parts that go into them and the dealers that sell and repair them. More than one in 10 Michigan residents is out of work -- the most of any state. And towns and cities across the great Midwest have watched unemployment climb higher than it’s been in decades.


The pain being felt in places that rely on our auto industry is not the fault of our workers; they labor tirelessly and desperately want to see their companies succeed. It's not the fault of all the families and communities that supported manufacturing plants throughout the generations. Rather, it's a failure of leadership -- from Washington to Detroit -- that led our auto companies to this point.


Year after year, decade after decade, we've seen problems papered over and tough choices kicked down the road, even as foreign competitors outpaced us. Well, we've reached the end of that road. And we, as a nation, cannot afford to shirk responsibility any longer. Now is the time to confront our problems head-on and do what’s necessary to solve them.


We cannot, and must not, and we will not let our auto industry simply vanish. This industry is like no other -- it's an emblem of the American spirit; a once and future symbol of America’s success. It's what helped build the middle class and sustained it throughout the 20th century. It's a source of deep pride for the generations of American workers whose hard work and imagination led to some of the finest cars the world has ever known. It's a pillar of our economy that has held up the dreams of millions of our people. And we cannot continue to excuse poor decisions. We cannot make the survival of our auto industry dependent on an unending flow of taxpayer dollars. These companies -- and this industry -- must ultimately stand on their own, not as wards of the state.


And that's why the federal government provided General Motors and Chrysler with emergency loans to prevent their sudden collapse at the end of last year -- only on the condition that they would develop plans to restructure. In keeping with that agreement, each company has submitted a plan to restructure. But after careful analysis, we've determined that neither goes far enough to warrant the substantial new investments that these companies are requesting.


And so today I'm announcing that my administration will offer GM and Chrysler a limited additional period of time to work with creditors, unions, and other stakeholders to fundamentally restructure in a way that would justify an investment of additional taxpayer dollars. During this period they must produce plans that would give the American people confidence in their long-term prospects for success.


Now, what we're asking for is difficult. It will require hard choices by companies. It will require unions and workers who have already made extraordinarily painful concessions to do more. It'll require creditors to recognize that they can't hold out for the prospect of endless government bailouts. It'll have to -- it will require efforts from a whole host of other stakeholders, including dealers and suppliers. Only then can we ask American taxpayers who have already put up so much of their hard-earned money to once more invest in a revitalized auto industry.


But I'm confident that if each are willing to do their part, if all of us are doing our part, then this restructuring, as painful as it will be in the short term, will mark not an end, but a new beginning for a great American industry -- an auto industry that is once more out-competing the world; a 21st century auto industry that is creating new jobs, unleashing new prosperity, and manufacturing the fuel-efficient cars and trucks that will carry us towards an energy-independent future. I am absolutely committed to working with Congress and the auto companies to meet one goal: The United States of America will lead the world in building the next generation of clean cars.


And no one can deny that our auto industry has made meaningful progress in recent years -- and this doesn't get talked about often enough. Some of the cars made by American workers right now are outperforming the best cars made abroad. In 2008, the North American Car of the Year was a GM. This year, Buick tied for first place as the most reliable car in the world. Our companies are investing in breakthrough technologies that hold the promise of new vehicles that will help America end its addiction to foreign oil.


But our auto industry is not moving in the right direction fast enough to succeed in a very tough environment. So let me discuss what measures need to be taken by each of the auto companies requesting taxpayer assistance, and I'll start with General Motors.


GM has made a good faith effort to restructure over the past several months -- but the plan that they've put forward is, in its current form, not strong enough. However, after broad consultation with a range of industry experts and financial advisors, I'm absolutely confident that GM can rise again, providing that it undergoes a fundamental restructuring. As an initial step, GM is announcing today that Rick Wagoner is stepping aside as Chairman and CEO. This is not meant as a condemnation of Mr. Wagoner, who's devoted his life to this company and has had a distinguished career; rather, it's a recognition that will take new vision and new direction to create the GM of the future.


In this context, my administration will offer General Motors adequate working capital over the next 60 days. And during this time, my team will be working closely with GM to produce a better business plan. They must ask themselves: Have they consolidated enough unprofitable brands? Have they cleaned up their balance sheets, or are they still saddled with so much debt that they can’t make future investments? Above all, have they created a credible model for how not only to survive, but to succeed in this competitive global market?


Let me be clear: The United States government has no interest in running GM. We have no intention of running GM. What we are interested in is giving GM an opportunity to finally make those much-needed changes that will let them emerge from this crisis a stronger and more competitive company.


The situation at Chrysler is more challenging. It's with deep reluctance but also a clear-eyed recognition of the facts that we've determined, after careful review, that Chrysler needs a partner to remain viable. Recently, Chrysler reached out and found what could be a potential partner -- the international car company Fiat, where the current management team has executed an impressive turnaround. Fiat is prepared to transfer its cutting-edge technology to Chrysler and, after working closely with my team, has committed to build -- building new fuel-efficient cars and engines right here in the United States. We've also secured an agreement that will ensure that Chrysler repays taxpayers for any new investments that are made before Fiat is allowed to take a majority ownership stake in Chrysler.


Still, such a deal would require an additional investment of taxpayer dollars, and there are a number of hurdles that must be overcome to make it work. I'm committed to doing all I can to see if a deal can be struck in a way that upholds the interests of American taxpayers. And that's why we'll give Chrysler and Fiat 30 days to overcome these hurdles and reach a final agreement -- and we will provide Chrysler with adequate capital to continue operating during that time. If they are able to come to a sound agreement that protects American taxpayers, we will consider lending up to $6 billion to help their plan succeed. But if they and their stakeholders are unable to reach such an agreement, and in the absence of any other viable partnership, we will not be able to justify investing additional tax dollars to keep Chrysler in business.


Now, while Chrysler and GM are very different companies with very different paths forward, both need a fresh start to implement the restructuring plan they develop. That may mean using our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger. Now, I want everybody to be clear about this. I know that when people hear the word "bankruptcy" it can be unsettling, so let me explain exactly what I mean. What I'm talking about is using our existing legal structure as a tool that, with the backing of the U.S. government, can make it easier for General Motors and Chrysler to quickly clear away old debts that are weighing them down so that they can get back on their feet and onto a path to success; a tool that we can use, even as workers staying on the job building cars that are being sold.


What I'm not talking about is a process where a company is simply broken up, sold off, and no longer exists. We're not talking about that. And what I'm not talking about is a company that's stuck in court for years, unable to get out.


So it's my hope that the steps I'm announcing today will have a salutary effect -- will go a long way forward towards answering many of the questions that people have about the future of GM and Chrysler.


But just in case there's still nagging doubts, let me say it as plainly as I can: If you buy a car from Chrysler or General Motors, you will be able to get your car serviced and repaired, just like always. Your warranty will be safe. In fact, it will be safer than it's ever been, because starting today, the United States government will stand behind your warranty.


But we must also recognize that the difficulties facing this industry are due in no small part to the weaknesses in our economy as a whole. And therefore, to support demand for auto sales during this period, I'm directing my team to take several steps.


First, we will ensure that Recovery Act funds to purchase government cars get out as quickly as possible and work through the budget process to accelerate other federal fleet purchases, as well.


Second, we'll accelerate our efforts through the Treasury Department's Consumer and Business Lending Initiative. And we are working intensively with the auto finance companies to increase the flow of credit to both consumers and dealers.


Third, the IRS is launching a campaign to alert consumers of a new tax benefit for auto purchases made between February 16th and the end of this year -- if you buy a car anytime this year, you may be able to deduct the cost of any sales and excise taxes. And this provision could save families hundreds of dollars and lead to as many as 100,000 new car sales.


Finally, several members of Congress have proposed an even more ambitious incentive program to increase car sales while modernizing our auto fleet. And such fleet modernization programs, which provide a generous credit to consumers who turn in old, less fuel-efficient cars and purchase cleaner cars, have been successful in boosting auto sales in a number of European countries. I want to work with Congress to identify parts of the Recovery Act that could be trimmed to fund such a program, and make it retroactive starting today.


Now, let there be no doubt, it will take an unprecedented effort on all our parts -- from the halls of Congress to the boardroom, from the union hall to the factory floor -- to see the auto industry through these difficult times. And I want every American to know that the path I'm laying out today is our best chance to make sure that the cars of the future are built where they've always been built -- in Detroit and across the Midwest -- to make America's auto industry in the 21st century what it was in the 20th century -- unsurpassed around the world. The path has been chosen after consulting with other governments that are facing this crisis. We've worked closely with the government of Canada on GM and Chrysler, as both those companies have extensive operations there. The Canadian government has indicated its support for our approach and will be announcing their specific commitments later today.


While the steps I'm taking will have an impact on all Americans, some of our fellow citizens will be affected more than others. So I'd like to speak directly to all those men and women who work in the auto industry or live in countless communities that depend on it. Many of you have been going through tough times for longer than you care to remember. And I won't pretend that the tough times are over. I can't promise you there isn't more difficulty to come.


But what I can promise you is this: I will fight for you. You're the reason I'm here today. I got my start fighting for working families in the shadows of a shuttered steel plant. I wake up every single day asking myself what can I do to give you and working people all across this country a fair shot at the American Dream.


When a community is struck by a natural disaster, the nation responds to put it back on its feet. While the storm that has hit our auto towns is not a tornado or a hurricane, the damage is clear, and we must likewise respond. And that's why today I'm designating a new Director of Recovery for Auto Communities and Workers to cut through the red tape and ensure that the full resources of our federal government are leveraged to assist the workers, communities, and regions that rely on our auto industry. Edward Montgomery, a former Deputy Labor Secretary, has agreed to serve in this role.


And together with Labor Secretary Solis and my Auto Task Force, Ed will help provide support to auto workers and their families, and open up opportunity to manufacturing communities in Michigan and Ohio and Indiana and every other state that relies on the auto industry.


They will have a strong advocate in Ed. He will direct a comprehensive effort that will help lift up the hardest-hit areas by using the unprecedented levels of funding available in our Recovery Act and throughout our government to create new manufacturing jobs and new businesses where they're needed most -- in your communities. And he will also lead an effort to identify new initiatives we may need to help support your communities going forward.


These efforts, as essential as they are, are not going to make everything better overnight. There are jobs that won't be saved. There are plants that may not reopen. There's little I can say that can subdue the anger or ease the frustration of all whose livelihoods hang in the balance because of failures that weren't theirs.


But there's something I want everybody to remember. Remember that it is precisely in times like these -- in moments of trial and moments of hardship -- that Americans rediscover the ingenuity and resilience that makes us who we are; that made the auto industry what it once was and what it will be again; that sent those first mass-produced cars rolling off the assembly lines; that built an arsenal of democracy that propelled America to victory in the Second World War; and that powered our economic prowess in the first American century.


Because I know that if we can tap into that same ingenuity and resilience right now, if we can carry one another through this difficult time and do what must be done, then we will look back and say that this was the moment when the American auto industry shed its old ways, marched into the future, remade itself, and once more became an engine of opportunity and prosperity not only in Detroit, not only in our Midwest, but all across America.


I'm confident we can make that happen, but we've got a lot of work to do. Thank you. Thank you, everybody.


END 11:25 A.M

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Determination of Viability Summary

General Motors Corporation

March 30, 2009


The Loan and Security Agreement of December 31, 2008 between the General Motors Corporation and the United States Department of the Treasury (“LSA”) laid out conditions that needed to be met by March 31, including the approval of Labor Modifications, VEBA Modifications, and the commencement of a Bond Exchange (all as defined in the LSA).


As of the date of this memo, the above steps have not been completed, nor are they expected to be completed by March 31. As a result, General Motors has not satisfied the terms of its loan agreement. Additionally, after substantial effort and review, the President’s Designee¹ has concluded that the GM plan, in its current form, is not viable and will need to be restructured substantially while GM operates under an amendment to the existing LSA. It is strongly believed, however, that such a substantial restructuring will lead to a viable GM.


This determination of viability was based on a thorough review, as conducted by the Task Force and its outside advisors and as summarized below, of the Company’s submitted plan and prospects. While there were many individual considerations, no single factor was critical to the assessment. Rather, the ultimate determination of viability was based upon a total consideration of all relevant factors, taken as a whole.


General Motors is in the early stages of an operational turnaround in which the Company has made material progress in a number of areas, including purchasing, product design, manufacturing, brand rationalization and its dealer network. Despite these steps, a great deal more progress needs to be made, and GM’s plan contemplates initiatives that will take many years to complete. In the end, GM’s plan is based on a number of assumptions that will be very challenging to meet without a more dramatic restructuring in which many of its planned changes are accelerated. A few highlights:


• Market Share: GM has been losing market share to its competitors for decades, yet its plan assumes only a very moderate decline, despite reducing fleet sales and shuttering brands that represent 1.8% of its current market share.


• Price: The plan assumes improvement in net price realization despite a severely distressed market, lingering consumer quality perceptions, and an increase in smaller vehicles (where the Company has previously struggled to maintain pricing power).


•Brands/Dealers: The Company is currently burdened with underperforming brands, nameplates and an excess of dealers. The plan does not act aggressively enough to curb these problems.


•Product mix: GM earns a large share of its profits from high-margin trucks and SUVs, which are vulnerable to a continuing shift in consumer preference to smaller vehicles. Additionally, while the Chevy Volt holds promise, it will likely be too expensive to be commercially successful in the short-term.


•Legacy liabilities: In GM’s plan, its cash needs associated with legacy liabilities grow to unsustainable levels, reaching approximately $6 billion per year in 2013 and 2014.


Moreover, even under the Company’s optimistic assumptions, the Company continues to experience negative free cash flow (before financing but after legacy obligations) through the projection period, failing a fundamental test of viability.


In short, while the Company has made meaningful progress in its turnaround plan over the last few years, the progress has been far too slow, allowing the Company to continue to lag the best-in-class competitors. As a result, the President’s Designee has found that General Motors’ plan is not viable as it is currently structured. However, because of GM's scale, franchise and progress to date, we believe that there could be a viable business within GM if the Company and its stakeholders engage in a substantially more aggressive restructuring plan.

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Determination of Viability Summary

General Motors Corporation

Detailed Determination


The Loan and Security Agreement of December 31, 2008 between the General Motors Corporation and the United States Department of the Treasury (“LSA”) laid out various conditions that needed to be met by March 31, including:


( a ) Approval of the Labor Modifications (Compensation Reductions, the Severance Rationalization and the Work Rule Modifications) by the members of the Unions;


( b ) Receipt of all necessary approvals of the VEBA Modifications other than regulatory and judicial approvals; provided, that the Borrower must have filed and be diligently prosecuting applications for any necessary regulatory and judicial approvals; and


( c ) The commencement of an exchange offer to implement a Bond Exchange.


As of the date of this memo, none of the above steps has been completed. As a result, General Motors has not satisfied the terms of its loan agreement.


The LSA also requires that the President's Designee review the Restructuring Plan Report in order to determine whether General Motors has taken all necessary steps to achieve and sustain the long-term viability, international competitiveness and energy efficiency of the Company and its subsidiaries


Since receiving the Company's plan on February 17th, the Government has engaged in substantial efforts to assess its viability. This work has involved staff from the Department of the Treasury, National Economic Council, Council of Economic Advisors as well as the numerous other Cabinet agencies involved in the President's Task Force on the Auto Industry. The working group has also worked extensively with several dozen individuals at industry-leading consulting, financial advisory and law firms. Numerous outside experts and affected stakeholders have been consulted. As a result of this work, the President’s Designee has concluded that the General Motors plan, in its current form, is not viable and will need to be restructured substantially in order to lead to a viable General Motors. It is strongly believed, however, that such a substantial restructuring will lead to a viable General Motors.


While the President's Designee considered many factors when assessing viability, the most fundamental benchmark was the following: for a business to be viable, it must be able, after accounting for spending on research and development and capital expenditures necessary to maintain and enhance the company's competitive position -- to generate positive cashflow and earn an adequate return on capital over the course of a normal business cycle.

Progress to date:


General Motors is in the early stages of an operational turnaround in which GM has made material progress in a number of areas:


Purchasing: GM has organized its purchasing globally, with its purchasing organization taking advantage of GM's global scale, and has put into place a rigorous, metric-oriented approach to drive supplier quality and cost improvements.


Product design: GM has refined its product design process to create global vehicle platforms, thus allowing GM to reduce engineering costs and improve the content of its cars. These global platforms leverage the scale of the business and allow GM to amortize product development costs over a large range of models. GM has also, since 2005, focused on customer needs, interior designs, styling and quality to provide more attractive products. Examples of successes of this initiative include the 2008 North American Car of the Year Chevy Malibu and the 2008 Motor Trend Car of the Year Cadillac CTS (though they constitute a modest share of GM's portfolio today).


Manufacturing: GM has worked to create greater flexibility within its facilities, allowing for increased capacity utilization and an enhanced ability to spread its significant fixed costs across a broader car base.


Brand rationalization: The recently announced decisions to divest or shut down Saab, Saturn and Hummer, while late, were important steps in reducing the Company’s brand portfolio and allowing it to focus its financial and human resources on a smaller number of higher quality brands.


Dealer network: GM has been eliminating dealers from markets where it is oversaturated, as well as eliminating dealers who are either unprofitable or create a poor customer experience.

However, it is important to recognize that a great deal more progress needs to be made, and that GM’s plan is based on fairly optimistic assumptions that will be challenging in the absence of a more aggressive restructuring.


The plan contemplates that each of its restructuring initiatives will continue well into the future, in some cases until 2014, before they are complete.


The slow pace at which this turnaround is progressing undermines the Company’s ability to compete against large, highly capable and well-funded competitors. GM’s plan forecasts it to catch up to (and, in some cases, surpass) its competitors’ current performance metrics; however, its key competitors are constantly working to improve as well, potentially leaving GM further behind over time.


Given the slow pace of the turnaround, the assumptions in GM’s business plan are too optimistic.


Market Share


GM has been losing market share slowly to its competitors for decades. In 1980, GM’s US market share was 45%; in 1990, GM’s US share was 36%, in 2000, its share was 29%. In 2008, its share was 22%. In short, GM has been losing 0.7% per year for the last 30 years.


Yet, in its forecast, GM assumes a much slower rate of decline, 0.3% per year until 2014, even though it is reducing fleet sales and shuttering brands which represent a loss of 1.8% market share, of which only a fraction will be retained. Management’s plan to achieve this is driven by a reduction in nameplates and an ensuing increase in marketing spend per nameplate.


Furthermore, in the current plan, GM has retained too many unprofitable nameplates that tarnish its brands, distract the focus of its management team, demand increasingly scarce marketing dollars and are a lingering drag on consumer perception, market share and margin.




In 2006 and 2007, GM North America achieved a 30.4% contribution margin. Then, the plan assumes, despite a severely distressed market, that margins increase to 30.8% in 2009 and 30.7% in 2010. These figures remain at 30.9% in 2013 and 30.3% in 2014, despite GM’s plan to increase its focus on passenger cars and crossovers, which have traditionally earned lower margins.


Fundamentally, the lingering consumer perception is that GM makes lower-quality cars (despite meaningful improvements in the last few years), which in turn leads to greater discounting, which harms GM’s price realizations and depresses profitability. These lower price points are an important impediment to enhanced GM profitability and need to be reversed over time in order for GM to bring its margins into line with its best-in-class peers.




GM has been successfully pruning unprofitable or underperforming dealers for several years. However, its current pace will leave it with too many such dealers for a long period of time while requiring significant closure costs that its competitors will not incur. These underperforming dealers create a drag on the overall brand equity of GM and hurt the prospects of the many stronger dealers who could help GM drive incremental sales.




GM's European operations have experienced negative results for at least the last decade with a sharp decline in market share from 12.9% to 9.3% between 1995 and 2008, leaving the Company with high fixed costs and low capacity utilization.


The European business is seeking additional capital beyond the funds requested from the Treasury. These funds have not been allocated and thus represent a risk to the viability of GM's current plan.


Product mix and CAFE compliance


GM earns a disproportionate share of its profits from high-margin trucks and SUVs and is thus vulnerable to energy cost-driven shifts in consumer demand. For example, of its top 20 profit contributors in 2008, only nine were cars.


GM is at least one generation behind Toyota on advanced, "green" powertrain development. In an attempt to leapfrog Toyota, GM has devoted significant resources to the Chevy Volt. While the Volt holds promise, it is currently projected to be much more expensive than its gasoline-fueled peers and will likely need substantial reductions in manufacturing cost in order to become commercially viable


Absent the successful introduction of a number of new-generation nameplates, as described in the Company’s plan, GM's product portfolio is more vulnerable to CAFE standard increases than the portfolios of many of its competitors (although GM is in compliance today with current standards). Many of its products fail to meet the minimum threshold on fuel economy and rank in the bottom quartile of fuel economy achievement.


Legacy liabilities - cash costs


As GM moves through its forecast period, its cash needs associated with legacy liabilities grow, reaching approximately $6 billion per year in 2013 and 2014. To meet this cash outflow, GM needs to sell 900,000 additional cars per year, creating a difficult burden that leaves it fighting to maximize volume rather than return on investment.


Even under the Company's optimistic assumptions, the Company remains breakeven, at best, on a free cash flow basis throughout the projection period, thus failing the fundamental test of viability.


Under its own plan, GM generates $14.5bn of negative free cash flow over its 6 year forecast period. Even in 2014, on its own assumptions, GM generates negative free cash flow after servicing legacy obligations.


Given the highly challenging current market, the Company is already behind plan in its overall volume expectations and market share for calendar year 2009.


Since the Company has built a plan with little margin for error, even slight swings in its assumptions produce significant and ongoing negative cash flows. For example, a 1% share miss in overall global sales, all else being equal, in 2014 would lead to a $2 billion cash flow reduction in that year.


In short, while the Company has made meaningful progress in its turnaround plan over the last few years, the progress has been far too slow, allowing the Company to continue to lag the best-in-class competitors. Furthermore, even if the projected plan is achieved, the cash flow forecast is quite modest, leaving the Company little margin for error in what will

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Determination of Viability Summary

Chrysler, LLC

March 30, 2009


Chrysler February 17 Plan

Viability Determination Summary


The Loan and Security Agreement of December 31, 2008 between Chrysler, LLC and the United States Department of the Treasury (“LSA”) laid out various conditions that needed to be met by March 31, including the approval of Labor Modifications, VEBA Modifications, and the commencement of a Debt Exchange (all as defined in the LSA).


As of the date of this memo, the above steps have not been completed, nor are they expected to be completed by March 31. As a result, Chrysler has not satisfied the terms of its loan agreement. Additionally, after substantial effort and review, the President’s Designee¹ has concluded that the Chrysler plan is not likely to lead to viability on a standalone basis, and that Chrysler must seek a partner in order to achieve the scale and other important attributes it needs to be successful in the global automotive industry while Chrysler operates under an amendment to the existing LSA.

This determination of viability was based on a thorough review, as conducted by the Task Force and its outside advisors and as summarized below, of the Company’s submitted plan and prospects. While there were many individual considerations, no single factor was critical to the assessment. Rather, the ultimate determination of viability was based upon a total consideration of all relevant factors, taken as a whole.


The Plan that was submitted by Chrysler on February 17, 2009 reflects some progress that has been made under current management but ultimately is insufficient due to several structural issues that Chrysler, as a standalone entity, is highly unlikely to overcome. In particular, Chrysler’s limited scale in an increasingly capital-intensive global business, the inferior quality of its existing product portfolio and its heavy truck mix leave the Company poorly positioned. Chrysler’s plan to address these issues is based on overly optimistic assumptions that are inconsistent with its current products and its resources. A few key challenges:


•Scale: Chrysler cannot afford to dedicate enough R&D to each product platform to maintain competitiveness, suffers from having a smaller supply purchasing base and amortizes its significant fixed costs over a much smaller base of vehicles than its competitors


• Quality: While the Company is committed to improving quality, its current quality scores significantly lag competitors. Chrysler admits that improving quality and associated brand perception will take a number of years.


• Product Mix: Chrysler does not have a product pipeline to cover the smaller car segments which are projected to grow in share of the overall car market and will struggle to meet proposed fuel-efficiency standards.


• Manufacturing: In contrast to best-in-class OEMs, as well as both GM and Ford, Chrysler has not invested significantly in common architectures and flexible plant manufacturing capacity, which will be critical to long-term profitability.


• Geographic Concentration: Unlike many of its competitors, Chrysler’s business is heavily weighted to North America, which makes the Company more vulnerable to local economic fluctuations and less able to take advantage of developing markets.

While the Company has made meaningful changes to its cost structure in the last few years, the combination of a fundamentally disadvantaged operating structure and a limited set of desirable products make standalone viability for the business highly challenging. As a result, the President’s Designee has found that Chrysler’s plan is not viable as currently structured. However, to the extent Chrysler can develop a partner who would improve Chrysler’s scale, bolster its product development, and allow it to enter the small car market with a robust set of products, Chrysler has some prospects for long term viability.

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Guest Martin

Toyota FJ Cruiser stomps all over American SUVs. It was developed with a younger audience in mind, this 5-passenger SUV's retro styling recalls the Toyota FJ40s of the 1960s. With its body-on-frame construction and choice of rear- or 4-wheel drive (RWD or 4WD, the latter complete with a 2-speed transfer case), the FJ Cruiser is designed to be durable enough for serious off-road driving, while retaining civilized on-road manners, according to Toyota.

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Guest LAW_*

General Motors Corporation (GM) announced last Wednesday that it saw a 45% drop in United States vehicle sales for its cars in March.


Executives from several auto firms, however, said that there was some hope for the auto industry to stabilise, as car sales rebounded in the last week of March.


"The market is starting to show small signs of life which need to be nourished like seedlings," said the vice president and chairman of Chrysler LLC Jim Press. "It's too early to see a trend, but spring shows signs of hope."


Other automobile manufacturers also saw their car sales slip: Chrysler and the Japanese Toyota both reported a 39% loss, whilst Ford Motor Company sales fell 41%.


Annualised sales of vehicles in the car industry in the US are predicted to have dipped below nine million in March, compared to February's 9.12 million, which was the lowest number since 1981.


"Auto makers are pulling every lever in their effort to attract buyers, as evidenced by the new programs from Ford and GM. The typical incentive programs simply do not resonate in today's economy," Jesse Toprak, an analyst for Edmunds.


Ford shares gained 2.3% to a level of US$2.69 in early trading at US stock markets on Wednesday, while stocks for Toyota's US depository increased 5.9% to $67. GM shares slipped 1.6% down to $1.92.

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  • 4 weeks later...
Guest chryslerllc

Chrysler LLC today announced that, as a result of the comprehensive restructuring plan agreed to by many of its stakeholders, it has reached an agreement in principle to establish a global strategic alliance with Fiat SpA to form a vibrant new company. It will allow Chrysler and Fiat to fully optimize their respective manufacturing footprints and the global supplier base, while providing each with access to additional markets. Fiat powertrains and components will also be produced at Chrysler manufacturing sites.


"This partnership transforms Chrysler into a vibrant new company with a wealth of strategic advantages," said Bob Nardelli, Chairman and CEO of Chrysler. "It enables us to better serve our customers and dealers with a broader and more competitive line-up of environmentally friendly, fuel-efficient high-quality vehicles. Benefits to the new company include access to exciting products that complement our current portfolio, technology cooperation and stronger global distribution."


Chrysler initiated discussions with Fiat more than a year ago to develop plans for a global product alliance. Over the past several months, these discussions have evolved and expanded. Chrysler and many of its stakeholders worked tirelessly to agree upon concessions that will result in a significantly lower cost base and enable fulfillment of a broader strategic alliance.


"We want to personally assure everyone that the new company will produce and support quality vehicles under the Jeep®, Dodge and Chrysler brands as well as parts under the Mopar® brand. Chrysler employees will become employees of the new company. Chrysler dealerships remain open for business serving our customers. All vehicle warranties will be honored without interruption and consumers can continue to purchase our vehicles with complete confidence," explained Nardelli.


Despite substantial progress on many fronts, Chrysler was not able to obtain the necessary concessions from all of its lenders, which would have avoided the need for a bankruptcy proceeding. As a result, under the direction of the U.S. Treasury, Chrysler LLC and 24 of its wholly owned U.S. subsidiaries today filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in U.S. Bankruptcy Court for the Southern District of New York.


"Even though total agreement was not possible, I am truly grateful for all that has been sacrificed, on the part of many of Chrysler's stakeholders to reach an agreement in principle with Fiat," said Nardelli. "My number one priority has been to preserve Chrysler and the thousands of people who depend on its success. While I am excited about the creation of the global alliance, I am personally disappointed that today Chrysler has filed for Chapter 11. This was not my first choice. "


Chrysler also will file a motion under Section 363 of the Bankruptcy Code requesting the swift approval by the Court of the agreement with Fiat and the sale of Chrysler's principal assets to the new company. The benefit of this type of filing is speed. It should allow a leaner new company to emerge in a matter of 30 to 60 days, well positioned for long-term viability .


Nardelli, who has been leading Chrysler since August 2007, also announced to Chrysler LLC's Board of Management and the U.S. Treasury his plan to leave the company following the emergence of the new company from Chapter 11 and the completion of the alliance with Fiat. He will return to Cerberus Capital Management LP as an advisor. "Now is an appropriate time to let others take the lead in the transformation of Chrysler with Fiat," said Nardelli. "I will work closely with all of our stakeholders to see that this new company swiftly emerges with a successful closing of the alliance."


During the restructuring process, the government will provide sufficient debtor-in-possession (DIP) financing to allow continuation of "business as usual." The company will seamlessly honor warranty claims, pay suppliers and keep our dealer body operating to continue to serve our valued customers.


"To create this vibrant new company, we are using this structured bankruptcy to rapidly implement tough but necessary changes, including: the agreed upon wage and benefit structure for active and retired employees that is competitive with those of transplant manufacturers; a reduction of debt and interest expense; the disposition of idle assets; a rationalized and more efficient dealer network; and sound agreements with our suppliers," said Nardelli.


Chrysler's Mexican, Canadian and other international operations are not part of any bankruptcy filing.


As part of the restructuring and with the backing of the U.S. Treasury, we have reached an agreement in principle with GMAC to become the preferred lender for Chrysler dealer and consumer business. GMAC will be able to offer the best long-term finance options for Chrysler dealers and customers with standard rate installment products.


When the transaction is completed, the Voluntary Employee Beneficiary Association (VEBA) will own 55 percent of the new company and the U.S. and Canadian governments will own proportionate shares of a 10 percent stake. Fiat will initially hold a 20 percent ownership stake in Chrysler. Fiat will have the right to increase its ownership stake an additional 15 percent in three increments as it meets the following criteria: 5 percent for bringing a 40 mpg vehicle platform to Chrysler to be produced in the U.S.; 5 percent for providing a fuel-efficient engine family to be produced in the U.S. for use in Chrysler vehicles; and 5 percent for providing Chrysler access to its vast global distribution network to facilitate the export of Chrysler vehicles. Fiat cannot become a majority owner until after all U.S. government loans have been completely repaid.


As a part of the restructuring, most manufacturing operations will be temporarily idled effective Monday, May 4, 2009. Normal production schedules will resume when the transaction is completed, which is anticipated within 30 to 60 days.


"We want to recognize the Administration, the U.S. Treasury, President's Auto Task Force, as well as Members of Congress and representatives at the state and community level and Canadian Federal and Ontario Provincial governments for their energy and efforts in helping to move this new company forward," Nardelli said. "It is also important to acknowledge Cerberus and Daimler, which provided the foundation for the alliance as well as Chrysler's many other stakeholders including the UAW and CAW leadership, employees, dealers and suppliers. Without their deep sacrifices, unstinting loyalty and enduring belief in Chrysler, the alliance would not have been possible. We look forward to our new partnership with Fiat. To be sure, there will be many changes as we move forward to implement our plans. But today, from many great parts, we begin to build a vibrant new company with less debt, a stronger balance sheet, richer product portfolio, supported by a well-positioned finance company."


More information will be available soon regarding Chrysler LLC's restructuring announcement at www.chryslerrestructuring.com or the following hotlines:


U.S./Canada toll-free phone number: 877-271-1568

International phone number: 503-597-770

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Guest Bob Nardelli

I am very pleased to announce that Chrysler LLC has signed an agreement in principle to

establish a global strategic alliance with Fiat to create a vibrant new car company.


For the past several months, we have worked tirelessly to reach agreement with key

stakeholders on concessions that would allow Chrysler to complete this alliance with Fiat and

proceed with its plans without the need for a bankruptcy proceeding. Despite substantial

progress on many fronts, the support of the U.S. and Canadian governments, and agreements

with most parties, including our unions, dealers and suppliers, it was not possible to obtain the

necessary concessions from all of our lenders. As a result, to facilitate this alliance with Fiat

and to create a new company, Chrysler filed voluntary petitions for a structured bankruptcy

under Chapter 11 of the U.S. Bankruptcy Code in U.S. Bankruptcy Court for the Southern

District of New York.


Here’s what is meant by a “structured” bankruptcy: With this filing, we will also submit a motion

under Section 363 of the Bankruptcy Code, requesting the swift approval by the Court of the

agreement with Fiat and the sale of Chrysler’s principal assets to a new company. With the

approval of the Court, a new stronger Chrysler will be out of bankruptcy in 30 to 60 days.

Rest assured that there will be not be a moment’s interruption in our work to meet the needs of

all our customers. The company will seamlessly honor all warranty claims and service

contracts. Chrysler will continue to produce and support quality vehicles over the long term,

under the Chrysler Jeep® and Dodge brands and parts under the Mopar brand.


Some may be wondering if purchasing a Chrysler vehicle now is a wise investment. Beginning

today, Chrysler can look forward to its future with great optimism. In most cases your local

Chrysler, Jeep and Dodge dealer has vehicles to sell that are well priced and with attractive

customer incentives. Your local dealer would welcome the opportunity to speak with you about

today’s products, which have the highest quality rankings of any in our history.


We are profoundly grateful for the support of the millions of owners of Chrysler vehicles. We

take enormous pride in the contributions we have made to our industry, are honored by the trust you have placed with us for over 80 years, and look forward to continuing to serve you for many years to come.


Again, I thank you for your support and look forward to serving you with outstanding products

and service from a strong new Chrysler.

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Guest August

People should be reading this. It is amusing to see the speculators hiding behind a curtain.


The decision by some lenders to hold out set off a political firestorm.


President Barack Obama called the holdouts "speculators" who hoped for a better deal from the U.S. taxpayer, and Michigan lawmakers threatened to pull state business from them.


A lawyer representing a group of the dissenters told the court on Monday that some who had been identified publicly had received death threats.


The first-lien lenders were owed a collective $6.9 billion, and four large banks led by JPMorgan Chase & Co that controlled about 70 percent of the debt had approved a plan to take $2 billion cash.


JPMorgan lawyer Peter Pantaleo, of Simpson Thacher & Bartlett LLP, told the court Chrysler had 90 percent of the debt agreed, more than the required support from secured lenders to support the sale.


A group of investment funds led by Oppenheimer Funds and Stairway Capital had objected to the payout terms as unfair and filed an immediate objection on Monday asking Gonzalez to block the Fiat deal and the government's offer to provide bankruptcy financing to Chrysler.


The $2 billion payout would amount to about 29 cents on the dollar, but a liquidation analysis prepared by an adviser to Chrysler suggested the payout could be as little as 9 cents on the dollar if the automaker were forced to liquidate.


The dissenting secured lenders said in their objection that the sale was being "orchestrated entirely by Treasury and foisted upon the debtors without regard to corporate formalities."


Tom Lauria, an attorney at White & Case who represents an ad-hoc group of the dissenting secured lenders, told the court that publicly identified group members had received death threats "which they perceive as being bona fide."


As a result, the group may seek to disclose its membership to the court under seal, Lauria said. Lenders who received death threats have notified police and the FBI, he said.



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Guest Lee Bellinger

Now that the federal government has assumed a significant ownership stake in General Motors - while screwing Chrysler bondholders (in favor of the UAW union bosses) and putting taxpayers on the hook for the companies' warranties - expect the feds to ram "green" cars down our throats.


Don't get me wrong, with an energy crisis looming, Independent Living readers know I favor development of alternative energies. And fuel efficiency is a legitimate goal... but not when it's imposed by government control freaks at extraordinary taxpayer expense.


What "Team Obama" at General Motors Doesn't Want You to Know


Leftists are elated that BARACK OBAMA now effectively "owns" General Motors and has finally dictated the construction of fuel-efficient "smart cars" to be foisted on U.S. consumers.


In the past, when the political class mandated Detroit build smaller, less crash-worthy cars, the public generally refused to buy them. But those who did buy them were killed in significantly-higher numbers.


Here's what taxpayers aren't being told about the new government-mandated GM cars the greenies are so excited about:


The Insurance Institute for Highway Safety (IIHS) reported that in a series of test crashes between minicars and midsize models, the "smart car" fared very poorly (the report focused on crashes with relatively moderate weight differences between subcompact and midsize models - not "fixed" tests between a subcompact and Hummers as some on the left have suggested to discredit IIHS's findings).

Despite recent engineering advances which make them safer in a crash, minicars are still death-traps in multiple-vehicle crashes - inflicting almost twice the rate of death as in larger cars. In single-car crashes the fatality statistics of mini-cars are even more stark: Three times as many deaths as in large cars!

A 2002 National Research Council study found that the old Federal Corporate Average Fuel Economy (CAFE) mandates to build smaller cars contributed to 2,000 U.S. highway deaths per year.

SAM KAZMAN of the Competitive Enterprise Institute (CEI) says there is absolutely no official federal interest in talking about the damning IIHS study. In fact, when CEI sued the Highway Safety Traffic Safety Commission in 1992, a federal appeals court found the agency guilty of using "mumbo jumbo" and "legerdemain" to conceal the high number of unnecessary highway deaths caused by dangerous CAFE-mandated cars.

KAZMAN also notes that leftists such as RALPH NADER once railed on car makers for making cheap, unsafe, small-size cars several decades ago before reversing their position in favor of CAFE standards for environmentalist reasons, despite the evidence of highway carnage. "CAFE presented them [the Naderites] a stark choice between more government power and more safety. And they went for more power."

The Micromanagement of Our Energy-Usage is Just Getting Started


Despite all the evidence, the OBAMA Administration has mandated Detroit increase fuel-economy standards from 27.5 mpg to 35 mpg. This policy will not only intrude on Americans' freedom to buy vehicles that suit their needs, but history shows it could also kill thousands of drivers annually.


In short, it's all about the politics of sacrifice.

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Guest Ken Kettenbeil

This non-standard crash test performed by the Insurance Institute for Highway Safety (IIHS) simulates a crash situation that is rare and extreme. The test used an extremely high crash severity which is unlikely to occur in real world crashes. In fact, less than 1% of all crashes fall within these parameters.


The test conducted by the IIHS was not consistent with how federal regulators evaluate vehicles in crash tests. The National Highway Traffic Safety Administration (NHTSA) requires that cars and trucks of all sizes meet stringent safety requirements.


The smart fortwo meets or exceeds all U.S. government crash test standards, including a 5-star side crash rating, and previously earned the highest scores for front and side crash worthiness from the IIHS in its standard test. The smart fortwo is equipped with advanced crash avoidance and crash protection safety systems, including electronic stability program (esp), and a reinforced steel safety cage called a tridion safety cell, which is standard equipment on all models.


For the past decade, smart has a proven track record of safety with approximately one million cars on the road in 37 countries. People drive small cars for many reasons, not just fuel economy as the IIHS states. People choose small vehicles because they are generally more environmentally friendly, a great value, they provide for greater driving and parking options in congested urban areas and many consumers tell us they are simply more fun to drive.


To see real-world safety testimonials from smart owners visit www.safeandsmart.com. To learn more about the facts of the smart fortwo and its safety management systems, visit



ABOUT the smart fortwo and smart USA


smart USA Distributor LLC, headquartered in Bloomfield Hills, Michigan, is the exclusive distributor of the smart fortwo in the United States and Puerto Rico and is a wholly owned subsidiary of Penske Automotive Group, Inc.


The smart fortwo is a brand of and is manufactured by Daimler AG. This technologically advanced vehicle achieves 41 mpg on the highway and is an ultra-low emissions vehicle, as certified by the State of California Air Resources Board.


The vehicle is 8.8 feet long, 5.1 feet tall and 5.1 feet wide and comes equipped with many functional and safety features found in most luxury models. smart is currently sold in 36 other countries, and

more than one million smart fortwos have been sold since 1998. The 2009 smart fortwo is available in five trim levels ranging in price from $11,990* to $20,990*. For more information visit the smart USA website –



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The Washington Post is now reporting that beleaguered U.S. automaker General Motors plans to ship many of the company’s planned new jobs overseas:



“The U.S. government is pouring billions into General Motors in hopes of reviving the domestic economy, but when the automaker completes its restructuring plan, many of the company's new jobs will be filled by workers overseas.


“According to an outline the company has been sharing privately with Washington legislators, the number of cars that GM sells in the United States and builds in Mexico, China and South Korea will roughly double. …


“As a result, the long-simmering argument over U.S. manufacturers expanding production overseas -- normally arising between unions and private companies -- is about to engage the Obama administration.”


Whoriskey, “Under Restructuring, GM To Build More Cars Overseas,” The Washington Post, 05.08.09

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Guest Alan

From what I am reading from various publications, I am getting the distinct impression that regardless of the result of any negotiations with any of the stake holders, that GM is headed for Chapter 11. Some seem to feel that it was intended that way from the very beginning of the government taskforce involvement. I am beginning to feel that way, myself. It scares me, because GM is a much bigger and more convoluted company than Chrysler. The danger I see is that, because of GM's size and the size of its debt, it will be more likely to get bogged down in court than Chrysler and is more in danger of being forced into liquidation. Once they enter the courtroom there is no predicting what the judge is going to decide, even with exit financing provided by the government.

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Guest McCloud

How bailing out GM in our national interest? Our taxpayer dollars should be going to companies here in America. General Motors is no longer an American company.

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