President Barack Obama announced Monday that his administration has determined that the restructuring plans offered by General Motors Corp. (GM) and Chrysler LLC do not go far enough to warrant additional government assistance. Rather, the embattled automakers will be allowed a limited period of time to fundamentally restructure, Obama said.

Flanked by Treasury Secretary Tim Geithner, economic advisor Larry Summers, and Transportation Secretary Ray LaHood, Obama also noted that an organized bankruptcy could be the best option for GM and Chrysler.

This restructuring, as painful as it will be in the short term, will mark not an end, but a new beginning for a great American industry, Obama said.

He commented on the forced resignation of GM's chief executive, Rick Wagoner, noting that it's not a condemnation of Wagoner's work, but rather a recognition of the need for a fresh start at the automaker.

Wagoner will receive a $20 million plus retirement settlement, it was revealed Monday.

At the request of the White House, Wagoner stepped down as chairman and CEO of GM, with Fritz Henderson, GM president and chief operating officer, set to replace Wagoner as CEO.

GM has made a good faith effort to restructure. but the plan that they've put forward is, in its current form, not strong enough, Obama said. I'm absolutely confident that GM can rise again, providing that it undergoes a fundamental restructuring.

The president added that the government has no interest in running GM and will instead give them 60 days to restructure.

The situation at Chrysler is more challenging, Obama noted, leading to the determination that Chrysler needs a partner in order to remain viable.

The U.S. government will be supportive of a deal between Chrysler and Fiat, Obama said. He announced that he is committed to doing all I can to see if a deal can be struck, adding that Chrysler and Fiat have 30 days to overcome hurdles that have prevented the deal.

If they are able to reach an agreement, Obama said that his administration would lend up to $6 billion in order to see the plan through.

However, both GM and Chrysler need a fresh start to implement the restructuring plan, Obama said.

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

Acknowledging that the word bankruptcy can be unsettling, Obama explained, What I'm talking about is using our existing legal structure as a tool that. can make it easier for General Motors and Chrysler to quickly clear away old debts that are weighing them down so that they can get back on their feet and onto a path to success.

A tool that we can use, even as workers staying on the job building cars that are being sold, the president added.

What I'm not talking about is a process where a company is simply broken up, sold off, and no longer exists, Obama continued. And what I'm not talking about is a company that's stuck in court for years, unable to get out.

In order to calm consumer fears and encourage vehicle purchases, Obama announced that the U.S. government would back warranties from GM and Chrysler.

Additionally, the IRS is launching a campaign to alert consumers of a new tax benefit - if you buy a car anytime this year you may be able to deduct the cost of any excise taxes.

Likening the struggle in the auto industry to natural disasters, Obama encouraged the country to respond and help the auto towns like it would a town struck by a hurricane.

The storm that has hit our auto towns - the damage is clear, and we must likewise respond, he said.

The failure of the automakers is not a reflection of the workers, Obama said. Instead, he pointed out that it is a failure of leadership - from Washington to Detroit - that led our auto companies to this point.

Noting that the nation cannot afford to shirk responsibility any longer, Obama added that We cannot, and must not, and we will not let our auto industry simply vanish.

The auto industry is a pillar of our economy that has held up the dreams of millions of our people, the president said.

However, taxpayers cannot continue to support poor decisions, he said. GM and Chrysler along with the rest of the American auto industry must function on their own, not as wards of the state, he said.

What we're asking for is difficult, the president continued. It will require hard choices by companies.extraordinarily painful concessions to do more. It will require efforts from a whole host of other stakeholders, including dealers and suppliers.

Only then can we ask American taxpayers to once again invest in the American auto industry, he said.

However, the restructuring will allow the U.S. to take the lead in the creation and production of clean cars, Obama said. He announced plans to work with Congress to create an incentive program encouraging Americans to turn in their old, inefficient cars for new, greener vehicles.

Although the American auto industry has made significant progress in clean cars, the change is not moving in the right direction fast enough to succeed in a very tough environment, Obama said.

In response, GM CEO Fritz Henderson, Wagoner's replacement, pledged to make the fundamental and lasting changes necessary to reinvent GM for the long-term.

Over the next 60 days, we will work around the clock, with all parties, to meet the aggressive requirements that have been set by the Task Force, Henderson said in a statement.

We have significant challenges ahead of us, and a very tight timeline, he added. Henderson said, The road is tough, but the ultimate goal - a leaner, stronger, viable GM - is one we share.

Additionally, Chrysler LLC Chairman and CEO, Bob Nardelli said, I want to personally assure all of our customers, dealers, suppliers and employees that Chrysler will operate 'business as usual' over the next 30 days.

While we recognize that we still have substantial hurdles to resolve, Chrysler is committed to working closely with Fiat, the Administration, U.S. Treasury and the Task Force to secure the support of necessary stakeholders, Nardelli added.

In Detroit itself, the reaction to the announcement ranged from upset to sympathetic.

It's about time, said unemployed carpenter Gary Luff. The people running that show haven't got a clue.

Others were more sympathetic to Wagoner, pointing out that turning around a behemoth like General Motors during his tenure was a near-impossible task.

The unions helped build that company, but they've also done more to destroy it than Toyota has, insisted Seth Kirshinn, a financial products salesman.

Senator Carl Levin, D-Mich., praised Obama for saying he is absolutely committed to the U.S. leading the world in building the next generation of cars.

In a conference call with reporters, Levin called the announcement a notable, appropriate, reassuring commitment.

Specifically, Levin said that he was happy that the administration noted the efforts made by the auto industry, stating that it marks a shift in tone from earlier administrations.

However, Levin added that he is sad to see Wagoner retire, noting the dedication Wagoner showed to GM. Levin said that Obama had already made the decision when he notified Levin of his decision regarding the automakers.

He's given half a lifetime to the company, Levin said. There's not much of a point in arguing if it's fair or unfair, wise or unwise, he added, regarding the decision to oust Wagoner.

House Speaker Nancy Pelosi, D-Calif., praised the decision, and offered congressional support for the president.

Congress is committed to working with the President to renew the auto industry so it can become a global, competitive, and innovative leader in fuel efficiency and in advanced energy-efficient technologies that reduce our dependence on oil and protect our environment, she said.

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