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Obama sets the bar high for automakers

Workers move the all-new Pontiac G3 hatchback to a display area at the General Motors's world headquarters in Detroit on Monday. President Obama refused further long-term federal bailouts for GM and Chrysler, saying more concessions were needed from unions, creditors and others before they could be approved. The president, eager to reassure consumers, announced the federal government would immediately begin backing the warrantees that new car buyers receive _ a step designed to signal that it is safe to purchase U.S.-made autos and trucks despite the distress of the industry.

Workers move the all-new Pontiac G3 hatchback to a display area at the General Motors's world headquarters in Detroit on Monday. President Obama refused further long-term federal bailouts for GM and Chrysler, saying more concessions were needed from unions, creditors and others before they could be approved. The president, eager to reassure consumers, announced the federal government would immediately begin backing the warrantees that new car buyers receive _ a step designed to signal that it is safe to purchase U.S.-made autos and trucks despite the distress of the industry.

The White House-orchestrated ouster of General Motors’ top executive sent a chilling message to unions, management, bondholders and others in the ailing auto industry: Make painful concessions if you want to survive.

The forced resignation of GM Chairman and Chief Executive Rick Wagoner was a slap in the face of the Big Three automakers, their unions and their creditors. It sends a dramatic signal that the Obama administration is determined to radically change direction and unafraid to step on some toes.

President Barack Obama unveiled Monday that new direction for Detroit’s automakers. Its details amount to a stern ultimatum to GM and Chrysler: Shape up in 30 to 60 days, or ship out. Only Ford, which has avoided a government loan so far, isn’t in Obama’s sights.

The White House determined that neither GM nor Chrysler is viable and the turnaround plans they submitted in February did not pass muster. Now, if GM and Chrysler LLC fail to meet their deadlines, they will face bankruptcy.

The plan gives GM 60 days of government backing, at which point it must be restructured or else. Chrysler will get 30 days and $6 billion to complete an alliance with Italian automaker Fiat SpA, which is seeking a 35 percent stake in the company.

None of those conditions will be easy, but Obama’s role in Wagoner’s departure sends a strong message to an industry that the White House says has been too slow to change its ways.

Wagoner, a former Duke University basketball player who had led the company for most of the decade, had been the public face of GM as it secured $13.4 billion in government loans from the Bush administration. He has been the most prominent leader among Detroit’s auto bosses, but his firing gives the administration a fresh start to establish a revitalized GM.

Both companies have been unable to secure agreements with their bondholders on proposals to reduce their debts by two-thirds. They have also failed to persuade the United Auto Workers union, a key Democratic constituency, to accept several cost-cutting measures.

The tandem of Wagoner’s resignation and the mention of bankruptcy as a serious consequence puts the bondholders and union on notice that their time is running out to reach an agreement with the companies.

“It shows that the administration does not believe the 50,000 jobs lost between Chrysler and GM and the plants closed is sufficient, painful restructuring,” said Rep. Thaddeus McCotter, R-Mich. “And if, as we have heard, that after 60 days in GM’s case and 30 days in Chrysler’s case, there is a substantial likelihood of bankruptcy. That is a distinct shift on the part of the administration.”

Obama’s attempt at industrial reorganization is reminiscent of his first brush with Detroit’s auto elite as a presidential candidate in 2007. In a speech to the Detroit Economic Club, Obama lectured the automakers for focusing on large cars while the United States’ dependency upon foreign oil jeopardized the nation’s security abroad and the global environment.

“The auto industry is on a path that is unsustainable for their business, for their workers and for America, and America must take action to make it right,” Obama said at the time. “That’s why my first proposal will require automakers to meet higher fuel standards and produce more fuel-efficient cars, while providing them the flexibility and assistance to do it.”

The speech irritated many industry officials and Michigan lawmakers, but candidate Obama highlighted it repeatedly as his ability to speak truth to power.

Now President Obama holds the fate of the auto giants in his hands.

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