Administration strikes cautious economic tone as G.M.'s new C.E.O. makes the Sunday rounds

General Motors' new C.E.O., Fritz Henderson, appeared this morning on NBC's Meet the Press and CNN's State of the Union to say that G.M. would survive as a company, even though bankruptcy loomed as a viable option. Henderson took the reigns at G.M. after the Administration asked former-C.E.O. Rick Wagoner to resign.

Henderson said that G.M. was focused on quickly returning to profitability so that they could repay the taxpayer's money.

"The day we took money from the taxpayer was one of the -- one of the most difficult days of certainly my career and of the history of General Motors," he said. "We need to respect the fact that we need to look after the taxpayer, we need to justify to the consumer and the taxpayer that we’re going to succeed going forward. And one of the -- one of the happiest days of my future career is going to be the day we pay the loans back."

Henderson refused to rule out the possibility of bankruptcy, saying that the company would do whatever was necessary to meet the goals set by the President's Task Force on the Auto Industry.

"Now we’re 55 days, not 60 days away -- and we either accomplish this job outside of bankruptcy in the short term; or alternatively, if it’s necessary, we’ll go into bankruptcy in order to get this job done," he said.

White House Senior Advisor stressed on Fox News Sunday that G.M. still had much work to do. "Whether it comes through some sort of structured bankruptcy or another process," he said, "there is no doubt that for General Motors to survive and prosper, as we all want them to, they’re going to have to do serious restructuring."

Speaking to the broader economy, Treasury Secretary Timothy Geithner stressed on CBS' Face the Nation that even as the economy recovers, it may take some time for the unemployment rate to fall.

"The typical pattern of recoveries," he explained, "is that growth recovers, growth starts to turn positive, people start to spend more, people -- businesses hire more, they invest more, before you see unemployment peak. That’s the crude reality of recoveries."

Geithner also left open the possibility that the government would ask bank executives to resign.

"If, in the future, banks need exceptional assistance in order to get through this, then we’ll make sure that assistance comes with conditions, not just to protect the tax payer but to make sure this is the kind of restructuring necessary for them to emerge stronger," he said. "Where that requires a change of management of the board, we’ll do that."

Geithner also emphatically denied reports that the Administration was working to circumvent Congress' restrictions on executive pay.

"Our obligation is to apply the laws that Congress just passed on executive comp," he said. "And we’re going to do that."

The Sunday talk shows also discussed North Korea's failure this morning to launch a missile that could deliver a payload into orbit. Susan Rice, the U.S. Ambassador to the U.N., appeared on ABC's This Week before heading to New York for an emergency meeting of the Security Council.

"Our assessment is that their pursuit of a missile capability is of grave concern and that their aim is to achieve the capability to deliver a weapon as potentially as -- to North America. I think we have to look at exactly what transpired today and make a new assessment of the consequences," she said.

Why is GM better off than Chrysler? White House points to Consumer Reports ratings

As President Barack Obama announced today, his administration believes that General Motors can restructure and be successful, but the president said Chrysler needs a partner to survive.

If you're wondering what, in the White House's opinion, separates the two companies' pursuits of success, there are several answers.

Chrysler is a smaller company, while GM has "a much more substantial collection of assets," a senior administration official told reporters on a conference call this weekend.

Here's one measure the government's auto task force used to determine the value of those assets that Mike Allen of the Politico called the "Consumer Reports Factor."

"If you look at things like Consumer Reports' ranking of cars, you'll see very great differences between those two companies," the White House official said. "Chrysler has zero cars, no cars that are recommended by Consumer Reports."

That administration official was correct, no Chrysler, Dodge, or Jeep models are recommended by Consumer Reports.

To be Consumer Reports recommended, a vehicle must have performed well in CR's tests, have average or better reliability, and, if crash-tested, provide good overall safety. This safety rating is a composite of accident avoidance from our testing and crash protection, based on insurance-industry and government crash tests. (Watch our videos about how CR tests cars.)

But CR's car experts did find some bright spots for Chrysler. In our Report Card for Detroit, Chrysler got this assessment:

Chrysler needs to give its model line a major overhaul and raise its reliability, interiors, fuel economy, and overall refinement up to the level of its styling.

That might have begun. Our initial impressions of the redesigned 2009 Dodge Ram pickup we're testing are mostly positive, and the ride is markedly improved. Newer Chrysler models, such as the Dodge Journey and Ram, have higher-quality interiors.

On the other hand, several recent GM models have performed well in Consumer Reports testing and have average or better predicted reliability.

The Chevrolet Avalanche was a Consumer Reports Top Pick in the pickup truck category, and other models fare well in their classes.

However, just 17 percent of the GM models tested meet the criteria to be recommended.

By contrast, 70 percent of models from Ford, Detroit's least endangered car company, are recommended by Consumer Reports.

The Report Card's look at GM's future:

GM needs to maintain the overall performance and quality it has shown in its newer models while developing a stronger line of small vehicles and raising its reliability to a more consistently high level.

The company is developing more efficient gasoline engines, using direct injection and turbocharging to help achieve a better balance of power and fuel economy. Its more fuel-efficient two-mode hybrid technology is expected to be available on more models. And it's investing heavily in electric powertrains, such as that in the forthcoming Chevrolet Volt, and in fuel-cell technology.

GM's next generation of small cars, including the Chevrolet Cruze, looks promising. And the company is active in developing interactive traffic-safety systems, wireless service checks, and other advanced applications.

If you're looking for the best makes from domestic companies, our 2009 list of American top picks is here.

Visit the Consumer Reports Cars page for all of our testing results, recommendations, and buying advice.

Obama's Detroit determination: GM "can rise again," Chrysler needs a partner

President Barack Obama broke the bad news to the General Motors and Chrysler, officially announcing that neither of the struggling companies will be given the money they need to survive without the government stepping in.

Plans submitted to the Obama administration by the two auto giants did not meet the White House's expectations for restructuring, the president said today, and neither Chrysler nor GM warrants "the substantial new investments that these companies are requesting."

However, funds will be provided to allow time for a more aggressive plan to be developed. (See the good and the bad Consumer Reports found from Chrysler and GM.)

GM did get a slightly more upbeat appraisal from the president, sending the struggling automakers to go back to the drawing board.

"While GM has made a good faith effort to restructure over the past several months, the plan they have put forward is, in its current form, not strong enough," Obama said. "However, after broad consultations with a range of industry experts and financial advisers, I’m confident that GM can rise again, provided that it undergoes a fundamental restructuring."

The government will give GM enough cash to operate for another 60 days, but there are strings attached. Rick Wagoner, the company's CEO and chairman, will step down. (Read more about GM’s executives on CR’s Cars Blog.)

GM will have to work with the White House's autos task force to come up with a plan to meet four points:

• Sustainable profitability: A viable GM should be able to generate meaningful positive free cash flow in a normalized business environment, generate net free cash flow over the course of a business cycle and invest capital in research and development and capital expenditures sufficient to maintain or enhance its competitive position while also earning an adequate return on its capital.
• A healthy balance sheet: The restructuring must substantially reduce GM’s outstanding debt and existing liabilities to a level where they are consistent with both its normalized cash flow and the cyclical nature of its business. Given the deterioration in the auto market since late last year, this will require substantially greater balance sheet concessions than those called for in the existing loan agreements.
• More aggressive operational restructuring: The restructuring plan must rapidly achieve full competitiveness with foreign transplants and more aggressively implement significant manufacturing, headcount, brand, nameplate and retail network restructurings.
• Technology leadership: The new GM will have a significant focus on developing high fuel-efficiency cars that have broad consumer appeal because they are cost-effective, have good performance and are reliable, durable and safe.

Chrysler got a less hopeful review from the White House.

"It is with deep reluctance but also a clear-eyed recognition of the facts that we have determined, after a careful review, that Chrysler needs a partner to remain viable," Obama said. "Recently, Chrysler reached out and found what could be a potential partner – the international car company Fiat, where the current management team has executed an impressive turnaround."

The president said that Chrysler has 30 days to make a Fiat deal happen. The government will hand out enough money for Chrysler to keep running in that time. If the two can make a partnership happen, the government will "consider lending up to $6 billion to help their plan succeed."

Obama left open the option that one or both of the companies may have to declare bankruptcy. He did try to make that prospect less threatening for employees, consumers, and shareholders.

"I know that when people even hear the word 'bankruptcy' it can be a bit unsettling, so let me explain what I mean," Obama said. "What I am talking about is using our existing legal structure as a tool that, with the backing of the U.S. government, can make it easier for General Motors and Chrysler to quickly clear away old debts that are weighing them down so they can get back on their feet and onto a path to success; a tool that we can use, even as workers are staying on the job building cars that are being sold. What I am not talking about is a process where a company is broken up, sold off, and no longer exists. And what I am not talking about is having a company stuck in court for years, unable to get out.”

The president also said that the government will back GM and Chrysler warranties. That may or may not alleviate the fears of car buyers, 78 percent of whom said they were unlikely to consider buying a new car from an automaker in bankruptcy, according to a recent Consumer Reports survey.

General Motors C.E.O. resigns ahead of federal aid announcement

General Motors C.E.O. Rick Wagoner resigned this morning at the urging of the Obama Administration ahead of an announcement detailing plans developed by the Presidential Task Force on the Auto Industry.

Wagoner, a G.M. employee for 31 years, presiding over losses totaling $82 billion during his eight-year tenure as C.E.O.

The President will announce tomorrow whether General Motors will receive $16.6 billion in requested government aid. The company is currently operating on a $13.4 billion infusion from the federal government.

On CBS' Face the Nation Obama this morning said that automakers faced significant challenges.

"They’re not quite there yet," he said, adding: "That’s going to mean a set of sacrifices from all parties involved, management, labor, shareholders, creditors, suppliers, dealers. Everybody is going to have to come to the table and say it’s important for us to take serious restructuring steps now in order to preserve a brighter future down the road."

Chrysler, which has also requested government aid, is expected to keep their C.E.O., Robert Nardelli. It is not yet known who will take the helm at General Motors.