Obama Spells Out Some Tough Love to GM and Chrysler

While I have not spent more than a few minutes reading Obama's latest words about the government's plan for GM and Chrysler, I can say my initial reaction is that I'm glad we have a President who is finally showing some tough love to Detroit. The next 6 months could be very painful for the entire automotive (and lower tier manufacturing) supply chain as a result, but we need a bit of darwinism introduced into the situation. I heard someone talking earlier today about GM essentially being in the business of taking care of pensioners and selling cars as a means to achieve this objective. Clearly, something is wrong this picture and Obama appears to realize this, cutting off the unlimited government funds checkbook (and not wanting to have the government take over GM). I also agree with his harsh suggestions to Chrysler: close the deal with Fiat, restructure or liquidate in the next 30 days. Finally, the Feds put on a Spend Management hat when it comes to taxpayer dollars and Detroit. The only piece I'm not so sure about is having the government take over warranty liability for GM and Chrysler, but I suppose that will help them continue to market to customers even if one or both goes through Chapter 11 (which is looking like the only course for GM). As to Chrysler, I'd bet that Chapter 7 (liquidation) is a greater possibility, but still, they need to sell the cars already sitting on dealer lots. What do you think? And what do you think the supply chain / supply risk impact will be?

Jason Busch

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