Speaking with reporters Wednesday, Obama stated his demand simply: "Get me a plan that works." The directive was aimed at the viability plans due for submission to Congress next Tuesday, February 17, per the conditions of the last round of talks in Washington.
The timing of the reports matches closely with the timing for a proposed Fiat-Chrysler tie-up that would see 35% of the ailing U.S. carmaker acquired by the Italian firm. It's not yet clear if that deal will allow Chrysler to continue accepting funds or retain the funds it has already received, however.
To allow for either eventuality, Chrysler is devising two separate viability plans: one with Fiat, and one without. There are strong arguments for the Fiat tie-up, not the least of which would be the ability to get a toe-hold in India. Though the Indian car market isn't yet a global contender, it is set to grow quickly within the coming decades, and establishing a presence now would be an excellent long-term strategy.
On the other hand, partnering with Fiat involves transferring 35% ownership of the company to a foreign corporation in return for little or no cash - a potentially unjustifiable move, at least before Congress. Explaining how giving away a third of the corporation's control is a wise business decision may take some doing. And getting barred from further federal loan funds could spell disaster that even Fiat can't help solve.
General Motors is facing a tough decision as well: it is considering selling part of its holding in a 50-50 joint venture with China' SAIC in order to raise much-needed cash. The joint-venture builds select Buick, Chevrolet and Cadillac cars in China. Reducing its holding in the venture could free up cash in the short term, which would sweeten the proposal to Congress. It would also weaken its position in China, which as of January was the world's largest car market.
Ford, for its part, appears to have kept itself largely above the maelstrom of financial and political wrangling surrounding government funding. It has done so thanks to loans in excess of $20 billion taken out in 2006, however, meaning it is not in a tremendously different situation from its Detroit fellows. And despite not yet dipping into the trough of federal loan money, it is interested in securing a $9 billion line of credit in the event that it does reach the brink of insolvency.
The bottom line for the industry is that all three companies must provide meaningful proof of completed and ongoing restructuring efforts and plans for viability in the immediate and near-term future in order to keep the government life-line alive. As time ticks down on the deadline to present those plans to Congress, it's the American public that is getting nervous watching the two sides prepare. Will it be battle or will it be business? We'll know February 17.
