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Obama asserts gov't control over the auto industry

(Agencies)
Updated: 2009-03-31 10:37

WASHINGTON -- US President Barack Obama asserted unprecedented government control over the auto industry Monday, bluntly rejecting turnaround plans by General Motors Corp. and Chrysler LLC, demanding fresh concessions for long-term federal aid and raising the possibility of quick bankruptcy for either ailing auto giant.

US President Barack Obama makes remarks on the American Automotive Industry, March 30, 2009, in the Grand Foyer of the White House in Washington. [Agencies]

Obama took the extraordinary step of announcing the government will back new car warranties issued by both GM and Chrysler, an attempt to reassure consumers their US-made purchases will be protected even if the companies don't survive.

"I am absolutely committed to working with Congress and the auto companies to meet one goal: The United States of America will lead the world in building the next generation of clean cars," Obama said in his first extended remarks on the industry since taking office nearly 10 weeks ago. And yet, he added, "our auto industry is not moving in the right direction fast enough to succeed."

Obama, flanked by several administration officials at the White House, announced a short-term infusion of cash for the firms, and said it could be the last for one or both.

Chrysler, judged by the administration as too small to survive, got 30 days' worth of funds to complete a partnership with Fiat SpA, the Italian manufacturer, or some other automaker.

Related readings: Timeline of GM's decline Obama rejects restructuring plans GM, Chrysler may need more aid GM CEO Wagoner to step down WH questions viability of GM

GM got assurances of 60 days' worth of federal financing to try and revise its turnaround plan under new management with heavy government participation. That would involve concessions from its union workers and bondholders. The administration engineered the ouster of longtime CEO Rick Wagoner over the weekend, an indication of its deep involvement in the industry.

Obama's announcement underscored the extent to which automakers have been added to the list of large corporations now operating under a level of government control that seemed unthinkable less than a year ago. Since last fall, the Bush and Obama administrations, often acting in concert with the Federal Reserve, have engineered the takeover of housing titans Fannie Mae and Freddie Mac, seized a large stake in several banks and installed a new CEO at bailed-out insurance giant American International Group.

Other presidents have forced showdowns with major industries, with mixed results. Harry Truman's decision to nationalize the steel industry on the eve of a strike in 1952 was ruled unconstitutional by the Supreme Court. But Ronald Reagan succeeded in busting the air traffic controllers' union three decades later.

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