WASHINGTON (Reuters) - President Barack Obama said on Thursday struggling U.S. auto companies could expect new government aid if they commit to “drastic” restructuring, promising to unveil a rescue plan in coming days.
In a town hall-style meeting featuring questions from a live audience and sent over the Internet, Obama also warned that the United States was likely to lose more jobs in the recession and that the economy was in for a “difficult time” for much of this year.
Without elaborating on a bailout price tag or specific restructuring steps for Detroit manufacturers, Obama said he wanted all major players to help overhaul a business model he called unsustainable.
Obama’s White House task force has a set a deadline of next Tuesday to determine whether General Motors Corp and Chrysler LLC, controlled by Cerberus Capital Management, can be made competitive and worthy of up to $22 billion in additional bailout funds.
The White House said on Thursday that Obama would unveil his plan to aid the auto industry before leaving on a European trip on Tuesday.
“What we’re expecting is that the automakers are going to be working with us to restructure. We will provide them some help,” Obama said in the White House question-and-answer session.
He said that help would depend on the companies’ “willingness to make some pretty drastic changes.”
“I know that it is not popular to provide help ... to auto companies,” he added. “If they’re not willing to make the changes and the restructurings that are necessary, then I’m not willing to have taxpayer money chase after bad money.”
GM and Chrysler received $17.4 billion in taxpayer assistance in December after saying they could not survive without it. Ford Motor Co, which is also struggling financially, has not sought a bailout.
Although Obama blamed mismanagement for some of the industry’s problems — mainly on fuel efficiency — Gibbs declined to comment on whether the White House would call for top-level auto executives to be replaced.
GM Chief Executive Rick Wagoner came under pressure to step down in December when Congress was debating a bailout for the automaker. He has said repeatedly he intends to stay on and GM’s board has offered its support.
Auto sector shares rallied across the board and GM jumped more than 14 percent after Obama’s comments.
Obama has long said Detroit should build more fuel-efficient vehicles rather than focus on gas-guzzling sport utility vehicles and less efficient pickups. Sales of both models have plunged and GM, Ford and Chrysler are overhauling their product lines to emphasize efficiency.
Obama said all sides would have to help restructure the industry.
“Everybody’s going to have to give a little bit: shareholders, workers, creditors ... suppliers, dealers,” he said. “Everybody is going to have to recognize that the current model — economic model — of the U.S. auto industry is unsustainable.”
Obama’s “virtual town hall” included questions submitted on subjects including education, energy and healthcare — all Obama priorities.
Among the questions on the White House website was whether legalizing marijuana use would help strengthen the economy and help address the battle against drugs. Obama answered, “No.”
Obama, in office for a little more than two months, has been stepping up efforts to sell his economic program to the public and to Congress, where some worry it will set the country on course to dangerously high deficits.
Democrats look likely to pass a budget proposal close to the $3.55 trillion sought by Obama’s Democratic administration, although Republicans are fighting to slice billions off the spending plan.
Obama meets with top bank chief executives around midday on Friday.
Obama, who said in a televised news conference this week that his budget proposal was inseparable from his larger plan to rescue the U.S. economy, warned on Thursday the country was not out of the woods yet.
“We’re going to have to be patient and persistent about job creation because I don’t think that we’ve lost all the jobs that we’re going to lose in this recession,” he said. “We’re still going to be in a difficult time for much of this year.”
Additional reporting by Tabassum Zakaria, Ross Colvin and John Crawley; Editing by Peter Cooney