Obama vows to help car industry, sets strict terms

US President Barack Obama has ordered ailing car manufacturers GM and Chrysler back to the drawing board if they are to receive further government bailout money.

GM and Chrysler have been seeking the extra cash to weather the economic crisis and avert bankruptcies that could have harsh repercussions across the USA.

But, Obama said restructuring plans submitted to date fell short of requirements – including greater efficiency, changed manufacturing processes and inevitable job losses – and therefore failed to justify further cash.

He gave GM 60 days, and Chrysler 30 days to come up with new plans, during which time they will continue to receive government support in working capital.

Obama said the administration would provide Chrysler with "working capital for 30 days to conclude a definitive agreement with Fiat and secure the support of necessary stakeholders."

If that succeeds, he said the government "will consider investing up to the additional six billion dollars requested by Chrysler", adding that government aid would stop if no agreement is reached.

Obama said the situation at Chrysler "is more challenging" than with GM.

“It is with deep reluctance but also a clear-eyed recognition of the facts that we have determined, after a careful review, that Chrysler needs a partner to remain viable," he said.

Obama said carefully controlled bankruptcy may be required if the companies are to survive.

Restructuring plans may "mean using our bankruptcy code as a mechanism to help them restructure quickly and emerge stronger," he said.

He explained going down this road would "clear away their old debts that are weighing them down so they can get back on their feet and onto a path of success”.

Mr Obama said this would not have to involve breaking the companies up. "What I am not talking about is a process where a company is broken up, sold off, and no longer exists.” He said. “And what I am not talking about is having a company stuck in court for years, unable to get out.”

Obama also announced an acceleration in federal fleet purchases, tax breaks for buyers and plans to develop a scheme, based on European models, of trading in older fuel-expensive cars for discounts on newer fuel-efficient models.