According to an article today The White house forced GM CEO Rick Wagoner to resign yesterday which he did – and is expected to announce new aid for GM and a 60-day deadline to restructure. At the same time Chrysler LLC apparently will get up to U.S.$6 billion and 30 days to complete an alliance with Italian automaker Fiat SpA. Persons familiar with the plan said Sunday the U.S. Administration will demand further sacrifices from the automakers and bankruptcy would be possible if they fail to restructure. The article reports the plan that will be presented includes government backing of warranties for Chrysler and GM vehicles to give consumers confidence, and that the administration did not view Chrysler to be viable as a standalone company.

I am surprised that the U.S. Administration is taking the position it is with Chrysler, am surprised with its demand that Wagoner resign, but otherwise am not surprised with the position it is taking with GM. Assuming President Obama’s announcement today parrots what has been reported, I am sure the U.S. Administration realizes that from a business point of view it puts it between a rock and a hard place in the context of the decisions it must make in the self-imposed deadlines of 30 days (Chrysler) 60 days (GM) it may proclaim. If a merger is not struck between Chrysler and Fiat within 30 days, or if GM is given a further extension on the its restructuring plan after 60 days the U.S. Administration will – at least in my view – lose credibility with respect to the positions it takes on the economy generally. I think saving both these companies is of huge importance to U.S. (and for that matter Ontario and Quebec) employment – both direct and indirect, and in my view if many of those jobs are lost that will exacerbate the current U.S. (and world) economic problems.

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