Obama Fires GM Chief in Effort to Save U.S. Auto Industry

As the economy slows, the American companies that make cars and trucks are on the verge of failing.

Late last year, General Motors and Chrysler asked the federal government for billions of dollars in emergency loans so they can stay afloat. President Bush gave them the money, on the condition that they developed new business plans.

Obama fires GM chief

	Chrysler and GM both submitted plans to restructure their companies, but President Obama said that they did not go far enough.

On March 29, President Obama scrapped those plans and forced GM CEO Rick Wagoner to quit. Mr. Obama said that GM has 60 days to come up with a new plan for the future or face bankruptcy. Chrysler has just 30 days to complete a merger with an Italian car company or face probable collapse.

Mr. Obama announced the decision at the White House Monday.

“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,” Mr. Obama said.

“During this period, they must produce plans that would give the American people confidence in their long-term prospects for success.”

Troubled companies

	The Obama administration concluded that Chrysler is no longer a viable company on its own, and suggested a merger with Italian carmaker Fiat.

While the global financial crisis has hurt a wide range of industries, American car companies have been in decline for some time.

Stiff competition from Japanese carmakers and high “legacy costs” – obligations to pay union worker health care and retirement benefits –have meant losses year after year.

GM lost $30.9 billion in 2008 and sold 23 percent fewer cars from 2007 to 2008. Chrysler, a smaller company, lost $8 billion and sold 30 percent fewer cars.

“The board and management came to Washington and said, ‘Look, we'd like you to open the taxpayers' purse to us.’ So in return for that, it is quite logical and understandable for the government to insist on new leadership and other conditions,” Paul Ingrassia, former Wall Street Journal Detroit bureau chief, told the NewsHour.

Ford, the other part of the “big three” U.S. automakers, is better off and says it does not need government help to survive.

More bailouts

	CEOs from the "big three" U.S. automakers asked Congress for billions in federal aid last year.

In return for making management changes and coming up with new business plans, Chrysler and GM will receive taxpayer money to stay afloat.

GM and Chrysler already received a combined $17.4 billion in loans from the government in 2008. GM wants $16.6 billion more while Chrysler wants $5 billion.

With the next round of bailout funds, the government is asking investors and worker unions to make new compromises in order to keep the companies afloat and prove they are "viable."

Such conditions have fueled criticism that the Obama administration is giving huge bailouts to the banking system – more than $700 billion so far – without firing anyone, while making U.S. automakers jump through hoops for survival.

In an e-mail to supporters, service employee union president Andy Stern called for the Obama administration to fire Bank of America CEO Ken Lewis.

“One CEO — GM’s Rick Wagoner — got his pink slip from President Obama this morning. The other — Bank of America’s Ken Lewis — accepted bailout funds while continuing to fleece consumers and taxpayers,” Stern wrote.

Fear in the Midwest

	Michigan is known as the center of the American car industry, but its unemployment rate is the highest in the U.S. at 12 percent.

While Chrysler and GM should be around for a few more weeks, the possibility of the companies going bankrupt has spread fear in parts of America where hundreds of thousands of people depend on these large companies for their paychecks.

"You want to make a plan for tomorrow. Right now, you work hard all day long and go home worried about losing your job the next day," said Tom Budimerovich, a Detroit autoworker, according to Reuters.