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Obama: Taxpayers Are Reluctant Shareholders in GM

President Barack Obama is defending the government's intervention in the auto industry, saying the collapse of GM and Chrysler would have been devastating for the economy and American workers.

President Barack Obama
Photo by: Lawrence Jackson
President Barack Obama

Obama said his policies will help both General Motors and Chrysler— storied companies in America's industrial history —survive after restructuring and bankruptcy.

Speaking at the White House, he said his administration had no choice but to intervene, putting the government in "the unwelcome position" of having a financial stake in the companies.

Obama said that GM's move into bankruptcy proceedings will actually it, calling it the move a "viable, achievable plan." He said the new plan will actually help the financially troubled GM to start growing for the first time in three years.

President Obama pushed GM into bankruptcy on Monday and said it was part of a "viable achievable plan that will give this iconic company a chance to rise again."

Obama said he hoped the firm would emerge quickly from bankruptcy court, and said the government was ready to commit an additional $30 billion to help the company get on its feet.

He said the government would own 60 percent of the new GM, and acknowledged that could prove controversial with some.

Seeking to ease those concerns, Obama said, "What I am not doing, what I have no interest in doing, is running GM."

Speaking at the White House, the president said auto executives "will call the shots and make the decisions about turning this company around." He said the government would refrain from playing a management role in all but the most critical areas.

"Our goal is to help GM get back on its feet ... and get out quickly," he said of the federal government.

He said the government would own 60 percent of the new GM—much as it has taken part ownership of Chrysler, banks and other corporations in recent months—and acknowledged that could prove controversial with some.

Seeking to ease those concerns, Obama said, "What I am not doing, what I have no interest in doing, is running GM."

The president said auto executives "will call the shots and make the decisions about turning this company around." He said the government would refrain from playing a management role in all but the most critical areas.

"Our goal is to help GM get back on its feet ... and get out quickly," he said of the federal government.

Obama spoke as GM entered bankruptcy court at the same time Chrysler was looking to emerge after a two-month reorganization. Over the weekend, a bankruptcy judge gave the No. 3 automaker approval to sell most of its assets to Italy's Fiat, part of a plan under which the U.S. government will own somewhat less than 10 percent of the firm.

Ford the other large U.S. automaker, has said it can weather the current economic and industry crises on its own.

Under the GM plan envisioned by Obama's auto industry task force, the federal government will wind up with 60 percent ownership in the one-time pillar of American capitalism.

That comes in addition to its smaller stake in Chrysler, as well as significant interests in banks, insurance giant AIG and two mortgage industry giants, Fannie Mae and Freddie Mac.

Speaking at the White House, where he was flanked by Cabinet secretaries and economic advisers, Obama said the coming restructuring will "take a painful toll on many Americans" with the closure of additional plants and the loss of jobs.

The president did not pause to answer questions, but Republicans had plenty.

"The only thing it makes clear is that the government is firmly in the business of running companies using taxpayer dollars," said House Republican Leader John Boehner of Ohio.

"Does anyone really believe that politicians and bureaucrats in Washington can successfully steer a multinational corporation to economic viability? It's time for the administration to fully explain what the exit strategy is to get the U.S. government out of the board room once and for all," Boehner said.

Obama cited Chrysler's experience in bankruptcy court as a model of how GM could fare. "Some said a quick bankruptcy was impossible ... they were wrong," he said.

He added that unnamed critics predicted car sales would "fall off a cliff," and added, "they were wrong." The outcome, he said, is "dramatically better than the one we found when we began."

Looking ahead, he said, GM will be prodded at every juncture by the administration's top officials.

The announcement marked the latest step in a series of measures Obama has taken since he became president to salvage an industry that has been part of the American landscape for a century.

Earlier in the year, he rejected a restructuring plan submitted by GM's ownership, and ordered its leaders to try again. They did, under the direction of administration officials, and the result is a blueprint in which hundreds of dealerships will be closed and familiar model names jettisoned.

Officials have estimated the new GM should be profitable at a level of 10 million vehicle sales a year. The company that entered bankruptcy court had to sell an estimated 16 million units to make a profit.

Obama stressed that GM's workers and its investors had both made sacrifices. The United Autoworkers Union agreed in recent days to numerous concessions, and a majority of investors agreed to accept less than the paper value of their holdings.

The administration, sensitive to charges that it favored the UAW, said the terms accepted by the unions were harsher than what had been proposed by the Bush administration.

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