General Motors Corp, whose chief executive was forced out by the Obama administration on Sunday, and Chrysler LLC will each be given capital and time to accelerate their attempts to restructure and survive, according to a government aid plan set for release on Monday.
A government official, who asked not to be identified because the plan would not be announced by President Barack Obama until Monday, said GM will be given 60 days to determine the best path forward.
Chrysler will be given 30 days to complete a proposed alliance with Italy's Fiat SpA. If the deal is successful, the government could extend up to $6 billion in new assistance.
The official did not say how much capital each company would receive over the next several weeks, and did not indicate what long-term financing GM might receive if it shows that a turnaround plan can be successful.
Chrysler has said it needs additional funding as soon as Tuesday to avoid a cash crisis. GM has previously said it needs more than $2 billion for April.
GM has asked for more than $16 billion in new government loans, while Chrysler wants $5 billion to ride out the weakest market for new cars in almost 30 years. Ford, which is also struggling, is not seeking federal help.
Earlier on Sunday, a White House official who also spoke anonymously because the company had not announced the move, said GM CEO Rick Wagoner, a career company executive and CEO since 2000, would step down at the request of the administration.
GM would not confirm the decision.
Wagoner was the second car executive to lose his job on Sunday. The board of France's PSA Peugeot Citroen fired CEO Christian Streiff and replaced him with Philippe Varin, who will take up the position on June 1, the company said in a statement. Peugeot last month posted a $460 million net loss and said it expected to stay in the red until 2010.
Mr. Wagoner has been asked to resign as a political offering despite his having led GM's painful restructuring to date, said U.S. Rep. Thaddeus McCotter, a Michigan Republican and member of the House Financial Services Committee.
University of Maryland economist Peter Morici, a one-time critic of Wagoner who had called for him to resign but more recently thought he was doing a better job, said the administration has a PR problem regarding corporate bailouts.
They are bailing out just about anybody that shows up and says they need cash. The public has grown weary of it and instead of throwing a banker to the wolves they have decided to throw Wagoner to the wolves, Morici said.
There was no word from the government or others with knowledge of the situation on the timing of Wagoner's departure or who would replace him.
Fritz Henderson, GM's chief operating officer, is the No.2 executive at the automaker and widely considered the leading internal candidate as Wagoner's successor.
We had feared the Obama administration may force some of the executives out. But we don't really see how this would make GM the better, stronger company that Obama wants it to be, said Rebecca Lindland, director of IHS Global Insight.
Obama last week cited mismanagement over the years for some of the auto industry's severe financial problems, a point that stung Wagoner since his counterparts at Ford Motor Co, Alan Mulally, and Chrysler, Bob Nardelli, are relative newcomers brought in from outside the industry.
GM has lost about $82 billion since 2005 when its problems began to mount in the U.S. market. GM has lost about 95 percent of its value since Wagoner took over as CEO.
GM lost its footing in the late 1970s and the board didn't seem to notice for another 20 years. Rick made a lot of decisions, but they came too late, said John Casesa, a managing partner at New York-based consulting firm Casesa Shapiro Group.
Wagoner was in Washington on Friday to meet the White House-appointed task force on auto restructuring. Obama is expected to announce that panel's recommendations on Monday.
Obama said earlier on Sunday that GM and Chrysler have not done enough to save themselves since receiving a $17.4 billion bailout in December.
They're not there yet, he said in a taped interview on the CBS-TV news program Face The Nation.
GM and Chrysler have run through most of the initial rescue money and are at risk of bankruptcy without immediate help.
The government has said it does not want to push GM or Chrysler into bankruptcy, although some analysts believe that is the only way to truly restructure the companies.
Wagoner has been outspoken in his opposition to a Chapter 11 reorganization, saying it would drive away consumers and probably lead to GM's liquidation.
But neither automaker has finished the cost-cutting overhaul dictated by the terms of their December bailout launched by the Bush administration that set a March 31 deadline for determining whether the companies can be saved.
Analysts say that presents a dilemma for the Obama administration.
GM and Chrysler employ almost 160,000 U.S. workers and allowing the automakers to fail would cause widespread hardship, especially in the industrial-belt Midwest, at a time when the economy remains mired in recession.