Obama seeks to reassure on GM

President Barack Obama sought to quell unease at Washington’s widening role in the US motor industry by promising on Monday that his administration would refrain from directly influencing General Motors and Chrysler in all but the most critical decisions.

Mr Obama’s pledge came as GM reassured customers and suppliers that it would continue business as usual after filing for Chapter 11 bankruptcy protection on Monday.

Washington is set to acquire a 60 per cent stake in GM and 55 per cent of Chrysler, its smaller rival that could emerge from its court-supervised restructuring within days in an alliance with Italy’s Fiat. The Canadian government will own 12.5 per cent of GM.

Mr Obama stressed the government was a “reluctant” shareholder in GM. “When a difficult decision has to be made on matters like where to open a new plant or what type of new car to make, the new GM, not the US government, will make that decision,” he said.

Richard Shelby, the lead Republican on the Senate banking committee, told the Financial Times that Mr Obama was on the “road to socialism; the road to nowhere”. Mr Shelby described the majority stake as “very disturbing” and said that the government should “get out” of the company.

None of GM’s overseas units, including its European Opel/Vauxhall arm, was included in Monday’s bankruptcy filing.

Fritz Henderson, GM’s chief executive, hinted at the precarious position of its European business late last week, as GM and the German government scrambled to finalise €1.5bn (£1.3bn) of emergency bridging finance to back the spin-off of GM’s European arm.

“It was very important for us to get clarity around Opel prior to today,” he said. “Had we not done that, we weren’t entirely sure what would happen.”

GM said the Chapter 11 filing would not affect arrangements with employees, suppliers, customers and dealers in Europe. Carl-Peter Forster, president of GM Europe, said it was “business as usual”, while a stake sale is negotiated with Canada’s Magna and Russia’s Sberbank, which want to buy a combined 55 per cent stake of Opel.

GM said it expected to emerge from Chapter 11 in August as a much leaner company. It could become a public company again within a year, said Kent Kresa, chairman.

The company that emerges from Chapter 11 will have only about $17bn of debt on its balance sheet, down from $80bn now, excluding $33bn in loans from the US and Canadian governments to finance its stay in bankruptcy. The new GM aims to break even at US sales of 10m cars and light trucks a year, compared with 16m now.

The company may announce as early as Tuesday a deal sell off its Hummer brand, the sport-utility vehicle unit.