Whither GM?

GM, Chrysler told to restructure -- or else

gm_wagonerIn an effort to right the flailing auto industry, President Barack Obama forced out General Motors CEO Rick Wagoner and said neither GM or Chrysler would receive anymore federal bailouts until the companies won more concessions from unions and creditors.

That’s tough love, but necessary. Automakers can’t treat the U.S. government like its own personal bank account.

GM was ordered to present a restructuring plan, but it just wasn’t good enough. “Based on extensive analysis and the advice of a range of financial and industry advisors, the administration has determined that GM has not presented a viable plan that would succeed, even in an improved economic environment,” the White House wrote in a fact sheet.

Though Obama is being tough, he is clear that “we cannot, and must not, and we will not let our auto industry simply vanish.”

To assuage the concerns of people considering buying a GM or Chrysler vehicle, the government said that it would immediately begin backing the warranties for new car buyers — a move that reassures consumers that it is still safe to buy U.S.-made vehicles.

A new warranty program, “will cover all warranties on new vehicles purchased from participating auto manufacturers during the period in which those manufacturers are restructuring. Both General Motors and Chrysler have agreed to participate in the program. Specifically, the program will:

• Create a separate account that will be funded with cash contributed by the manufacturer and a loan from the U.S. government to pay for repairs covered by the manufacturer’s warranty on each new vehicle sold by a participating domestic auto manufacturer during its restructuring period. The cash contribution will be 125% of the costs projected by the manufacturer to satisfy anticipated claims under the warranty issued on that vehicle; and

• In the event of a failure of a participating auto manufacturer, appoint a program administrator who, together with the U.S. government, will identify an auto service provider to supply warranty services.”

Of course, Obama can’t let either company go under, but as a taxpayer it bothers me that these companies were so inefficient for so long. I fear that Detroit will be hit by even more layoffs.

GM and Chrysler owners and shareholders: are you reassured by the Obama administration’s strategy? Does the plan give you confidence that you won’t get stuck with a problem vehicle? Will you buy American or seek a car or truck from a foreign automaker? Will this plan get the automakers back on track?


Deborah Creighton Skinner is the editorial director at BlackEnterprise.com.

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