(CEP News) - The U.S. auto sector is once again under pressure after the Auto Task Force rejected restructuring plans presented by General Motors and Chrysler on Monday, threatening both firms with bankruptcy.

The move cuts off $21.6 billion in financing promised to GM and Chrysler had they succeeded in laying out comprehensive viability plans by March 31.

At the request of the White House, GM CEO Rick Wagoner has been asked to step down after several years of service, and the board of directors will be reshuffled as the government forcibly takes control of the firms’ restructuring plan.

Wagoner will be replaced by Chief Operating Officer Frederick Henderson, while the government looks at a “surgical” 30-day bankruptcy filing for the firm.

Meanwhile, Chrysler has 30 days to close deal with Fiat or be forced into bankruptcy, but CEO Bob Nardelli gets to keep his job for now.

The U.S. has agreed to assume all warranties for both firms, until they return to profitability.

In the aftermath of the announcement, shares for GM were down 21% in pre-market trading while rival firm Ford was down 6.7%.

Unlike GM and Chrysler, Ford managed to build up a sufficient capital cushion to manage its own restructuring projects.

By Erik Kevin Franco, efranco@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca

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Posted in Categories: Australia, Auto, Economy, Releases, USA.

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