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This morning marked a significant moment in history for a mainstay of the American economy, and an important move by President Obama to act in the best interests of all the stakeholders in the American auto industry, the American taxpayer, and the economy at large.
He began by discussing Chrysler, which just successfully emerged from bankruptcy:
When my administration took office and began going over Chrysler's books, the future of this great American car company was uncertain. In fact, it was not clear whether it had any future at all. But after consulting with my Auto Task Force, industry experts, and financial advisors, and after asking many tough questions, I became convinced that if Chrysler were willing to undergo a restructuring, and if it were able to form a partnership with a viable global car company, then Chrysler could get a new lease on life.
Well, that more promising scenario has now come to pass. Today, after taking a number of painful steps, and moving through a quick, efficient, and fair bankruptcy process, a new, stronger Chrysler is poised to complete its alliance with Fiat. Just 31 days after Chrysler's Chapter 11 bankruptcy filing, a court has approved the Chrysler-Fiat alliance, paving the way for a new Chrysler to emerge from bankruptcy in the next few days.
He went on to discuss the carefully crafted plan to get General Motors back on its feet for good:
What we have, then, is a credible plan that is full of promise. But GM can't put this plan into effect on its own. Executing this plan will require a substantial amount of money that only a government can provide. Considering GM's extensive operations within their borders, the governments of Canada and Ontario have agreed to do their part with an investment in GM's future, and I want to thank them for doing so. I also want to thank the government of Germany for working diligently to reach a Memorandum of Understanding on the sale of a major stake in GM's European Division and for providing interim funding that will make it possible for that transaction to be finalized.
But of course GM is an American company with tens of thousands of employees in this country, and responsibility for its future ultimately rests with us. That's why our government will be making a significant additional investment of about $30 billion in GM -- an investment that will entitle American taxpayers to ownership of about 60 percent of the new GM.
Now, let me talk about this. I recognize that this may give some Americans pause. So let me explain as clearly as possible why we are making this investment. We inherited a financial crisis unlike any that we've seen in our time. This crisis crippled private capital markets and forced us to take steps in our financial system -- and with our auto companies -- that we would not have otherwise even considered. These steps have put our government in the unwelcome position of owning large stakes in private companies for the simple and compelling reason that their survival and the success of our overall economy depend on it.
Understand we're making these investments not because I want to spend the American people's tax dollars, but because I want to protect them. Instead of taking so much stock in GM, we could have simply offered the company more loans. But for years, GM has been buried under an unsustainable mountain of debt. And piling an irresponsibly large debt on top of the new GM would mean simply repeating the mistakes of the past. So we are acting as reluctant shareholders -- because that is the only way to help GM succeed.
What we are not doing -- what I have no interest in doing -- is running GM. GM will be run by a private board of directors and management team with a track record in American manufacturing that reflects a commitment to innovation and quality. They -- and not the government -- will call the shots and make the decisions about how to turn this company around. The federal government will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions. When a difficult decision has to be made on matters like where to open a new plant or what type of new car to make, the new GM, not the United States government, will make that decision.
In short, our goal is to get GM back on its feet, take a hands-off approach, and get out quickly.
As we say, it is a tremendously complex situation, read the President’s full remarks
or the White House fact sheet
to fully understand how the President is dealing with it. The President did not hide the fact that the process at hand will be painful for many, but as he closed he hit a hopeful note:
I'm confident that the steps I'm announcing today will mark the end of an old GM, and the beginning of a new GM; a new GM that can produce the high-quality, safe, and fuel-efficient cars of tomorrow; that can lead America towards an energy independent future; and that is once more a symbol of America's success.