Obama: fresh start for the U.S. auto industry needed
Three hours ago, President Obama outlined his plan for struggling U.S. car makers. He blamed a “failure of leadership from Washington to Detroit” for the dire situation of GM and Chrysler and forced GM’s CEO Rick Wagoner to resign. GM president Fritz Henderson - who had been president of Singapore-based GM Asia Pacific and later chairman of GM Europe - will become his successor tomorrow.
“Year after year, decade after decade, we have seen problems papered-over and tough choices kicked down the road, even as foreign competitors outpaced us,” Obama said. “Well, we have reached the end of that road. And we, as a nation, cannot afford to shirk responsibility any longer. Now is the time to confront our problems head-on and do what’s necessary to solve them.”
President Obama also said ”we cannot, we must not, and we will not let our auto industry simply vanish. This industry is, like no other, an emblem of the American spirit, a once and a future symbol of America’s success”.
However, he pointed out that running GM is not the government’s intention and that the auto industry must ultimately stand on its own feet. To achieve this goal and to get GM ”back on its path to success“, a painful restructuring wil have to be executed. This will require huge sacrifices from all stakeholders - GM employees, retirees, unions, dealers and part suppliers. After having rejected the submitted restructuring plans by GM and Chrysler (which were the condition for the emergency loans in December), President Obama made it clear that both companies either do what the government demands or collapse. General Motors will receive funding for an additional 60 days and Chrysler will receive funding for 30 days with the condition to finalize a merger with the Italian car maker Fiat.
Obama envisions an auto industry that is investing in breakthrough technology, producing more fuel-efficient cars in the U.S., helping to break America’s addiction to foreign oil and becoming strong and competitive again. “The path I am laying out today is our best chance to make sure the cars of the future are built where they’ve always been built – in Detroit and across the Midwest.”
If GM and Chrysler fail to revamp their business plan, bankruptcy will be the consequence. However, Obama explained that bankruptcy would not mean the liquidation of the companies. Rather it would be a quick way to “clear away old debts that are weighing them down “, a tool that would help to “create the GM of the future”.
To avoid that potential car buyers refuse to buy GM or Chrysler cars with the prospect of bankruptcy in mind, the U.S. federal government launched a program that guarantees the warranties of every new GM and Chrysler car sold.
The bottom line is that there’ll still be a strong auto industry in the United States in the future, although it might look fundamentally different. The U.S. automotive industry had been producing mostly poor quality cars at high labor costs while foreign competitors outengineered and outsold them. Obama wants the United States to ”lead the world in building the next generation of clean cars”. By investing taxpayer money he wants to ensure that the ailing U.S. auto industry of today will be transformed into a “21st century auto industry” that will “carry us to an energy-independent future”.
I am pretty sure that the new administration’s actions will boost the development of electric cars in the United States. As regards GM, I would favor bankruptcy though it is vital that the development and production of the Chevrolet Volt and other alternative fuel propulsion cars won’t be delayed. There’ll be a huge market for electric cars in the United States in the not-too-distant future and it’s absolutely necessary that at least one American car maker will be leading the transition of the auto industry. I’m sure that the United States will be a leading producer of electric cars rather sooner than later, but I’m not so sure whether Detroit will remain the “Automotive Capital”.
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For further information:
http://www.nytimes.com/2009/03/31/business/31auto.html?pagewanted=1&ref=business
