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US gives Detroit carmakers a last lifeline

General Motors and Chrysler were given deadline extensions today from the US Government to attempt to secure their futures.

President Obama said: " “We cannot, we must not, and we will not let our auto industry simply vanish. But we cannot continue to excuse poor decisions. And we cannot make the survival of our auto industry dependent on an unending flow of taxpayer dollars.”

Chrysler has been allowed until the end of April to seal a merger with Fiat or another carmaker to gain $6bn extra aid. Otherwise it will get no state help, and may have to file for bankruptcy.

And after the US Government demanded the resignation of GM chief executive Rick Wagoner, the carmaker was granted until the end of May to come up with a new survival plan.

US officials believe this could still include a short period of Chapter 11 bankruptcy for GM.

The extensions, which include working capital support from the US Treasury, follow the failure by both carmakers to produce satisfactory restructure plans to the US government by March 31 – a condition of the US aid they have already received. 

Obama said the carmakers' restructuring plans may mean using the US bankruptcy code as a mechanism to help them restructure quickly and emerge stronger, by enabling them to "quickly clear away their old debts that are weighing them down so they can get back on their feet and onto a path of success."

Obama said this would not have to involve breaking the companies up.

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