WASHINGTON — Declaring that the country had reached the end of the road with Detroit's automakers, President Obama on Monday mapped a new course for bailed-out General Motors Corp. and Chrysler in a series of moves designed to force the hands of workers, creditors and others with a stake in the companies.
Obama, using the threat of bankruptcy as a weapon, vowed to transform the U.S. auto industry by pushing GM and Chrysler to make major changes in exchange for billions in additional taxpayer money they need to survive.
The tactic, including the administration's ousting over the weekend of GM Chairman and Chief Executive Rick Wagoner, puts the government in the extraordinary position of dictating the ongoing policies of major, largely unregulated firms.
Administration officials said a quick, government-led bankruptcy would be a last resort. But if it comes to that, they said, the court process could be used to separate the companies' good assets from the bad. The good assets would form stand-alone companies to survive or be sold; the bad assets would be purged.
Obama also said he would seek ways to encourage consumers to buy new cars, sounding like a TV pitchman by promising that the government would guarantee the warranties of GM and Chrysler vehicles even as the companies teeter on the edge of bankruptcy.
"Your warranty will be safe," Obama said in televised remarks. "In fact, it will be safer than it's ever been, because starting today, the United States government will stand behind your warranty."
He also said he was exploring ways to provide tax credits or vouchers for people who trade in older gas guzzlers for new cars, a "cash for clunkers" program that has been used in California and abroad.
And the Internal Revenue Service on Monday began touting a tax break introduced last month that allows some car buyers to deduct from their income taxes the sales and excise taxes on purchases made by the end of the year.
All the moves were designed to save the industry by forcing major changes on two of Detroit's Big Three. Ford Motor Co. has not sought federal aid.
"Year after year, decade after decade, we've seen problems papered over and tough choices kicked down the road, even as foreign competitors outpaced us," Obama said. "Well, we've reached the end of that road."
News of the government's actions helped send the stock market tumbling Monday. The Dow Jones industrial average fell 254 points, or 3.2%.
