By Sara.Behunek
The presidents plan for General Motors and Chrysler announced yesterday continues to get top billing in the press. Obama took a hard stance with the struggling automakers giving GM 60 days to come up with a viable not to mention drastic restructuring plan and Chrysler 30 days.
If the companies fail to do this he would allow them to file for bankruptcy. The New York Times reports that as a result the United Automobile Workers which along with bondholders has thus far balked at the GMs demands will be asked to make even bigger concessions 2 on a new wage and benefits contract and health benefits for retirees.
Bondholders will most likely be forced to accept a deep discount on the price of their debt as well as agree to take GM stock in lieu of debt repayments. In addition Chrysler must merge with Fiat by April 30 Obama said.
The Wall Street Journal concludes that Obamas plan stems not only from his interest in saving jobs but also from the chance to push other policy prescriptions 3 in particular creating a company of the future with clean and energy-efficient vehicles a frequent campaign theme during Mr. Obamas quest for the presidency. The plan it says is also fraught with political risk and controversy as it is now obvious that the administration will be taking its largest role yet in the operations of the automakers a role that dwarfs that of any other company receiving U.S. aid.
And just as things were going so well the announcementat least in partsent stocks plummeting 4 the WSJ reports in a separate article. Dow Jones fell 254.16 points or 3.3 percent to 7522.02 with all of its components declining. S&P 500 meanwhile dropped 28.40 points (3.5 percent) to 787.54. Nasdaq shrunk by 43.40 points (2.8 percent) to 1501.80. Also applying downward pressure on the indices was a draft communique from the G20 that suggested that the global economic slowdown could last through the end of next year the paper says.
The Washington Post highlights the probability that emerging nations will help shape the global economic recovery 5 as major leaders at this weeks G20 summit including Obama are expected to agree to add 10 developing countries to the council that has long operated as a club of rich nations.
In addition the one-day summit to be held on Thursday is expected to bring new regulations for banks and hedge funds a boost in funding for the International Monetary Fund and a pledge against protectionism. Several major developing countriesmost notably Chinaare also in late-stage negotiations to win new authority to shape decisions at the IMF an organization that developing nations have long complained dictate to them rather than hear them out the paper says.
Bloomberg keeping its nose to the ground on the AIG issue reports that the insurer is being investigated by 50 separate state insurance regulators 6 which are trying to determine whether the firm violated state workers compensation rules.
Beth Dwyer general counsel for the Rhode Island insurance regulator a lead state in the examination says that AIG may not have followed state-approved insurance ratings. The probe was actually born from a 2005 lawsuit brought by Eliot Spitzer when he was New York attorney general. He accused AIG of shortchanging the premiums used in calculating its obligations to state pools which serve as an insurer of last resort.
If found in the wrong AIG could be fined or penalized in another way which may distract AIG as the firm wrestles with repaying a federal loan and separate reviews into employee compensation Bloomberg says.
