Following reports that General Motors CEO Rick Wagoner is stepping down at Obama’s request comes reports that the Commander in Chief has decided to grant both GM and Chrysler additional short-term aid. In effect, the Obama administration has rejected the latest restructuring plan from both automakers, claiming that the plans don’t go far enough. As usual, both automakers must satisfy certain conditions in tandem to the short-term aid they will receive. Here is what the Obama’s administration had to say…

General Motors ….

• GM’s plan is not strong enough – the company has failed to meet many of the objectives established in its latest restructuring plan
• GM will need a new CEO, a condition that has been met with the recent resignation of current CEO Rick Wagoner, and with Fritz Henderson taking the helm as the automakers interim CEO. Wagoners resignation “was not meant as a condemnation Rather, it’s a recognition that it will take new vision and new direction to create the GM of the future”, said Obama
• GM has to consolidate enough on profitable brands, clean up balance sheets, and revamp its business model to survive.
• GM will have 60 days to complete its restructuring; it will recieve an unspecified amount of aid in the course of those 60 days.

Chrysler ….

• Chrysler’s situation is more challanging – the automaker is in a more dire state than it has led people to believe.
• Unless it combines with Fiat, Chrysler won’t get any more U.S. help because it isn’t viable as a stand-alone company, according to the administration.
• Chrysler has 30 days to finalize its partnership agreement with Fiat; the automaker will receive $6 billion in federal aid and over the course of the 30 days. The automaker has proposed giving Fiat a 35 percent stake in the company.

Applicable to both GM and Chrysler

• Chapter 11 bankruptcy still an option
• U.S. government will stand behind the warranties of GM and Chrysler cars. For more details on this government warranty program, see here.

Source: Bloomberg

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