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Obama Gets Tough With GM, Chrysler

RENEE MONTAGNE, Host:

This is MORNING EDITION from NPR News. I'm Renee Montagne.

STEVE INSKEEP, Host:

GM and Chrysler are being told to imagine what they considered unimaginable. President Obama spoke of bankruptcy court as he laid out the next steps for the automakers, which is not what the companies were hoping to hear. Their executives have said this would ruin them. In a moment we will talk with an analyst about the companies' prospects for long term survival. First NPR's Scott Horsley looks at the case for putting the carmakers into bankruptcy court.

SCOTT HORSLEY: President Obama says the federal government must not and will not let the domestic auto industry disappear. But he's not willing to use taxpayer dollars to prop up that industry indefinitely, either. Speaking at the White House yesterday, Mr. Obama said it may take bankruptcy to give the two automakers the fresh start they need.

BARACK OBAMA: I know that when people hear the word bankruptcy it can be unsettling, so let me explain exactly what I mean.

HORSLEY: Mr. Obama says he is talking about a quick reorganization under court supervision, one that would allow GM and Chrysler to shake off their heavy debt burdens while many workers stay on the job and assembly lines keep running.

OBAMA: What I'm not talking about is a process where companies simply broken up, sold off and no longer exists. We're not talking about that.

HORSLEY: Although the administration says bankruptcy may offer GM and Chrysler their best chance of success, the president stopped short of that option yesterday. Instead, he gave the two companies one more chance to solve their own problems and just enough government money to stay afloat for a month or two.

OBAMA: During this period they must produce plans that would give the American people confidence in their long term prospects for success.

HORSLEY: As a first step in that makeover the administration asked CEO Rick Wagoner to step aside, and over the weekend, Wagoner did so. White House spokesman Robert Gibbs was peppered with questions yesterday about why the administration had not demanded similar executive ousters at big banks, since they also made mistakes and now need government help.

ROBERT GIBBS: This administration is rightly matching and balancing the notion for responsibility, at the same time understanding that we want to be a partner in ensuring strong and viable auto industry as we move forward.

HORSLEY: President Obama joked on "60 minutes" last week - the only thing less popular than bailouts for banks, is government help for the auto industry. Frank Newport, of The Gallup Poll, says a survey taken for USA Today, over the weekend, found nearly six in 10 Americans opposed to government help for the carmakers.

FRANK NEWPORT: Despite all of the rationale that the Obama administration has used, as late as this weekend, just a day or two ago, the American public said no.

HORSLEY: President Obama will keep trying to sell his proposal, though, and in the meantime he's also pitching in to help sell a few cars. The administration says slumping sales are only part of the problem at GM and Chrysler, but to avoid driving would be buyers away, the government has agreed to back stop the warranties on the two company's vehicles.

OBAMA: If you buy a car from Chrysler or General Motors you will be able to get your car serviced and repaired just like always. Your warranty will be safe. In fact, it will be safer than it's ever been because starting today the United States government will stand behind your warranty.

HORSLEY: Scott Horsley, NPR News, The White House. Transcript provided by NPR, Copyright NPR.

Scott Horsley
Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.
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