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Obama's plan to save GM: bankruptcy, $30 billion

By David Espo

AP Special Correspondent

Published: Monday, June 1 2009 12:28 p.m. MDT

President Barack Obama, accompanied by members of his Cabinet and staff, speaks about General Motors and the auto industry, Monday in Washington.

Charles Dharapak, Associated Press

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WASHINGTON — President Barack Obama pushed a humbled General Motors Corp. into bankruptcy on Monday and said the federal government will act as "reluctant shareholder" when it assumes a 60 percent ownership of the smaller carmaker that emerges.

The president said he hopes GM — once a proud symbol of American capitalism — would emerge quickly from bankruptcy court, and pledged up to $30 billion in additional federal assistance to help it get on its feet.

The government's partial stake in GM comes on top of a far smaller ownership of Chrysler LLC, as well as significant federal equity in banks, the AIG insurance giant and two mortgage industry titans — all victims of an economic crisis unrivaled since the Great Depression.

Republicans lobbed questions in Obama's direction even before he finished speaking.

"The only thing it makes clear is that the government is firmly in the business of running companies using taxpayer dollars," said House Republican Leader John Boehner of Ohio.

"Does anyone really believe that politicians and bureaucrats in Washington can successfully steer a multinational corporation to economic viability? It's time for the administration to fully explain what the exit strategy is to get the U.S. government out of the board room once and for all," Boehner said.

But the president said the actions were part of a "viable, achievable plan that will give this iconic company a chance to rise again."

Speaking at the White House, where he was flanked by Cabinet secretaries and top economic advisers, he added, "What I am not doing, what I have no interest in doing, is running GM."

The president said auto executives "will call the shots and make the decisions about turning this company around." He said the government would refrain from playing a management role in all but the most critical areas.

"Our goal is to help GM get back on its feet ... and get out quickly," he said of the federal government.

The carmaker's CEO, Fritz Henderson, said at a news conference in New York, "This new GM will be built from the strongest parts of our business, including our best brands and products." He took over at the helm of the firm with the approval of the Obama administration, which engineered the ouster of his predecessor, Rick Wagoner.

Obama spoke as GM entered bankruptcy court at the same time Chrysler was looking to emerge after a two-month reorganization. Over the weekend, a bankruptcy judge gave the No. 3 automaker approval to sell most of its assets to Italy's Fiat, part of a plan under which the U.S. government will own somewhat less than 10 percent of the firm.

Ford Motor Co., the other large U.S. automaker, has said it can weather the current economic and industry crises on its own.

Obama said the coming restructuring will "take a painful toll on many Americans." GM announced during the day that it would permanently close nine more plants and idle three others, steps affecting as many as 20,000 workers.

Obama cited Chrysler's experience in bankruptcy court as a model of how GM could fare.

"Some said a quick bankruptcy was impossible ... they were wrong," he said.

He added that unnamed critics predicted car sales would "fall off a cliff," and added, "they were wrong." Chrysler sold more cars in May than it did in April.

The outcome, he said, is "dramatically better than the one we found when we began."

Looking ahead, he said, GM will be prodded at every juncture by the administration's top officials.

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