Hard Line on Auto Aid Puts Bailed-Out Firms on Notice

GM Ouster and Bankruptcy Warning Resonate at Banks

By Tomoeh Murakami Tse
Washington Post Staff Writer
Tuesday, March 31, 2009

NEW YORK, March 30 -- After ousting General Motors' chief executive, President Obama warned Monday that bankruptcy may be unavoidable for two American automotive giants.

The administration's display of authority sent U.S. stocks tumbling and raised questions about whether the government would take similar steps against top executives at U.S. banks that are also receiving government bailout funds.

The administration told GM and Chrysler they had failed to come up with restructuring plans that justify the billions of dollars in additional taxpayer funds they are requesting. GM was ordered to devise a new plan, while Chrysler was instructed to reach a deal with Fiat in which the Italian carmaker would take a stake in Chrysler.

Obama said that if they fail to achieve those goals, GM and Chrysler might need to use bankruptcy as a "mechanism to help them restructure quickly and emerge stronger." Such a move would wipe out the mountain of debt weighing down the companies.

(More here.)