Latest on GM unheavals...
On Mar 30, 6:42*am, HK wrote:
GM, Chrysler Must Revamp Plans to Get More U.S. Aid (Update2)
By John Hughes
March 30 (Bloomberg) -- General Motors Corp. and Chrysler LLC must
overhaul their recovery plans with deeper concessions to justify further
taxpayer aid, and bankruptcy may ultimately be their best chance, an
Obama administration official said.
The administration demanded the resignation of GM Chief Executive
Officer Rick Wagoner, and the company said he will be replaced by Fritz
Henderson, its president and chief operating officer. GM will also
replace most of its board and must increase reliance on producing more
fuel-efficient vehicles, under findings to be announced today at the
White House by President Barack Obama.
Chrysler will get $6 billion in aid only if it completes a partnership
with Italian carmaker Fiat SpA in 30 days, said the administration
official, who spoke to reporters and declined to be identified before
Obama presents the decision. Unless it combines with Fiat, Chrysler
won’t get any more U.S. help because it isn’t viable as a stand-alone
company, the administration found.
Auburn Hills, Michigan-based Chrysler values its proposed technology
sharing with Turin-based Fiat at $8 billion to $10 billion. Assuming the
accord between the two companies is approved, Fiat will produce its
first model with Chrysler in 2011, Fiat CEO Sergio Marchionne has said.
Detroit-based GM sought as much as $16.6 billion in additional aid after
receiving $13.4 billion since December. Chrysler sought $5 billion after
receiving $4 billion. Both had to show progress by the end of this month
in matters such as GM’s need to reduce unsecured debt by two-thirds.
Shares Plunge
General Motors fell as much as 57 cents, or 21 percent, to 2.15 euros
and was down 15 percent as of 10:18 a.m. in Frankfurt. The stock has
plunged 22.6 percent this year in Germany. GM tumbled 87 percent in New
York Stock Exchange composite trading last year, the most among the 30
stocks in the Dow Jones Industrial Average.
Neither company completed the tasks, the administration official said.
The aid plans submitted to the government Feb. 17 don’t warrant
additional assistance, the administration concluded. GM’s plan to cut
unsecured debt by two-thirds wasn’t sufficient, and Chrysler’s debt was
far beyond what the company could sustain, the official said.
GM’s plan wouldn’t lead to success even in an improved economy, the
administration found. The new strategy sought by the administration
would focus on sustainable profit and significant changes in brands,
workforce, nameplates and the retail network. Board member Kent Kresa
will serve as GM’s interim chairman.
Kresa is a former chairman and chief executive of Northrop Grumman
Corp., the third-largest U.S. defense company. He is also chairman of
Avery Dennison Corp., which develops self adhesives for consumer products..
Kresa, Henderson Comment
It’s “not yet known” who the board will nominate to constitute the new
majority of directors at the next annual meeting, Kresa said in a
statement posted on GM’s Web site. Wagoner said in a separate statement
that Henderson is “an excellent choice” to replace him and “the ideal
person” to lead the company through restructuring.
GM, which will continue to receive an undisclosed amount of government
aid as it develops a new plan over 60 days, will get greater guidance
from the Treasury and outside advisers in the process than previously,
according to the administration. The government was silent on how much
more aid GM may receive if it devises a successful plan.
Chrysler’s plan included assumptions that were unrealistic or overly
optimistic, according to the administration. Chrysler is being required
to get greater concessions from the United Auto Workers than its plan
requires and must get rid of the vast majority of outstanding secured debt.
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