President Barack Obama said on Monday he would work with Congress to find recovery act funding for a ‘clunker’ trade-in programme that would give new car buyers incentives to trade in older, ‘dirtier’ vehicles for newer, cleaner and more efficient models.

Any such programme would be retroactive to today (30 March), Obama said, citing the recent success of such programmes in some European countries.

Noting that over 400,000 jobs had been shed in the US auto sector in the last year alone, and that one in 10 Michigan residents were out of work – the most in any state, Obama named a new director of recovery for auto communities and workers, “to cut through the red tape and ensure the full resources of our federal government are leveraged to assist the workers, communities and regions that rely on our auto industry”.

Edward Montgomery, a former deputy labour secretary, has taken on the role and will work with the department of labour and the autos task force using recovery act funds.

But Obama stressed that not every auto job would be saved, nor would every shuttered auto plant reopen.

“There’s little I can say that can subdue the anger or ease the frustration of all whose livelihoods hang in the balance because of failures that weren’t theirs,” he said in a wide-ranging White House briefing – without taking questions – that largely confirmed earlier announcements, and did not rule out the possibilities of structured bankruptcies, with government backing, at both GM and Chrysler.

The present pain was not the fault of auto workers nor of plants and the communities that supported manufacturing, Obama said. “Leadership is to blame in the face of foreigners outpacing us.

“We cannot, and must not, and will not let the auto industry vanish. It’s a source of deep pride and has made some of the finest cars in the world.”

He said the administration could not excuse poor decisions or allow the industry to survive on a flow of taxpayer dollars, hence the recent emergency loans to prevent sudden collapse.

Neither recovery plan submitted by GM and Chrysler had gone far enough so both companies were getting limited additional time to produce new plans that must prompt confidence in their long-term success.

“Only then can we ask taxpayers to once more invest in revitalised auto industry,” Obama said.

He said he was committed to work with Congress and automakers so the US would lead the world in making clean cars but the industry was not moving in the right direction fast enough.

He said GM had made a “good faith effort” in the last few months but needed a fundamental restructure. The fact that chairman and CEO Rick Wagoner had been asked to step aside was not a condemnation of the man but a recognition the company needed new vision and direction.

Obama said that GM, as announced earlier, would be given 60 days and sufficient working capital to develop a better business plan – considering such matters as had it decided on enough unprofitable brand consolidation, reduced enough debt and created a survivable business model.

“Let me be clear,” Obama stressed. “The US government has no interest in running GM. We have no intention of running GM. We are interested in giving GM enough opportunity to finally make those much-needed changes that will let it emerge from this crisis a stronger and more competitive company.”

The Chrysler situation was more challenging, he said, and the administration had “reluctantly” decided it needed a partner to remain viable.

Fiat was prepared to transfer technology to Chrysler and help build fuel-efficient cars in US; and had also agreed the taxpayer would be repaid before it was allowed to take a majority stake in Chrysler.

Obama said he was committed to do all possible to see a deal struck and had offered 30 days working capital.

If Chrysler and Fiat can come up with a workable plan protecting taxpayers, the government will lend up to $6bn.

“If unable, in the absence of any other viable partner, we could not justify investing additional taxpayer dollars to keep Chrysler in business,” he said.

Obama said the companies may, in the end, need to use the US bankruptcy code to help restructure and emerge stronger.

Such a “tool” with US government backing would allow them to quickly clear debts weighing them down, so they could get back on their feet and on the path to success.

“[This is] a tool we can use even as workers stay on the job, building cars that are being sold. I’m not talking about a process where a company is broken up, sold off and no longer exists.

“We’re not talking about a company stuck in court for years, unable to get out.” [An apparent reference to supplier Delphi, which has been unable to emerge from Chapter 11 for several years.]

Government warranty support would also be offered.

“If you buy a car from GM and Chrysler you will be able to get it serviced and repaired just like always. Your warranty will be safe. Safer than it’s ever been because starting today the US government will stand behind your warranty,” Obama said.

He also promised to ensure recovery act funds to purchase government cars were available as soon as possible and to accelerate and spur lending and the flow of credit to consumers and dealer.

He also wants the IRS to widely publicise a tax benefit available on any new vehicle bought from 16 Feb to the end of 2009 where a taxpayer may be able to deduct sales and excise tax.

Graeme Roberts