GM, Chrysler scolded but given more time to restructure

Political leaders on both sides of the Canada-U.S. border are giving General Motors and Chrysler extensions on deadlines to come up with viable restructuring plans, saying the auto manufacturers fell short in their first attempts.

U.S. President Barack Obama was first out of the gate on Monday, givingGeneral Motors and Chrysler some more breathing room and some words of warning.

In rejectingan earlier submission from the automaker, Obama said GM will get 60 days to come up with a new plan and the U.S. government willprovide the troubled automaker with enough working capital during that time.

Obama said the U.S. government has determined that Chrysler is not viable on its own, and has given the company 30 days to come up with a technology transfer agreement with European automaker Fiat. If an agreement can be reached in that time, the U.S. government will consider providing Chrysler with the $6 billion US in financing it has requested.

McMaster University labour studiesProf. Charlotte Yates said a deal with Fiat would give Chrysler access to a management team that has already turned around an auto company, and gives Chrysler new technology and product lines.

Yates said a deal with Fiat comes "almost as a quick fix for Chrysler."

Obama called the problems faced by the U.S. domestic automakers a failure of leadership from Washington to Detroit.

"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 in his speech from the White House.

"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 whats necessary to solve them," he said.

Disappointment in Canada

Canadian politicians also expressedregret that GM and Chrysler could not come upwith viable plans.

Federal Industry Minister Tony Clement, along with Finance Minister Jim Flaherty and Ontario Economic Development Minister Michael Bryant, said GM has 60 days to come up with a plan for its Canadian division, while Chrysler has 30 days to reach a deal with the Canadian Auto Workers union and with Fiat.

At the same time, Clement said the first of the $4 billion in interim loans to the two companies is going out. Chrysler will get$250 millionon Monday of the $1 billion allocated, whilethe first of $3 billion in funds for GM will begin to flowin early April.

"We are making this strategic investment to support an orderly restructuring of a critical industry with [the]goal of ensuring that Canada maintains its 20 per cent productionshare in the future," Clement said.

Clement said the situation at Chrysler is so tight that the company might not have been able to make payroll without the government money.

Canadian Auto Workers president Ken Lewenza said the union won't reopen its collective agreement with GM Canada despite pressure from politicians that more cost restructuring is needed.

"We did it once 10 months ago and we did it again less than a month ago," he said. "Opening up bargaining won't resolve this problem."

Lewenza said the union is still trying to work out a new collective agreement with Chrysler in advance of a March 31 deadline.

Wagoner out

Obama's plan has already claimed one casualty, as General Motors' chairman and CEO Rick Wagoner resigned Monday effective immediately, at the request of the White House.

"On Friday, I was in Washington for a meeting with administration officials," Wagoner said in a statement. "In the course of that meeting, they requested that I 'step aside' as CEO of GM, and so I have."

Wagoner, 56, joined GM in 1977, serving in several capacities in the United States, Brazil and Europe. He had been CEO since May 1, 2003.

While the terms of GM's government loans prevent it from giving executives severance pay, Wagoner will be able to collect a pensionthat had an accumulated value of$22.1 million US as of Dec. 31.

According to the company's latest annual report, he'll also receive $367,000 in stock awards and $535,000 in deferred compensation.

Wagoner's replacement is Fritz Henderson, GM's president and chief operating officer.

Henderson, 50, was named to his current position in 2008. He was previously vice-chairman and chief financial officer.

Kent Kresa, the chairman emeritus of Northrop Grumman Corp., has been named interim non-executive chairman of the board of directors.Kresa has been a GM director since 2003.