TBO.com - TBO is Tampa Bay Online

General Motors And Chrysler Request More Federal Aid

ADVERTISEMENT

The Washington Post

Published: February 18, 2009

WASHINGTON - Citing worsening U.S. economic conditions, GM and Chrysler told the Obama administration Tuesday that the companies need at least an additional $14 billion in loans to survive.

The ailing automakers already have received government loans totaling $17.4 billion. But declining sales forecasts, worse than feared, have driven up their cash needs as the global economic woes have persisted.

"We have continued to see an unprecedented decline in the automotive sector," Chrysler Chairman and Chief Executive Robert Nardelli said.

The automaker requests now compel Congress and the Obama administration to weigh the risks of making the additional multibillion loans against having one or two of the nation's most important manufacturers run aground, potentially provoking hundreds of thousands in additional job losses during one of the deepest recessions in decades.

The new loan requests came as the companies met a deadline to offer the government their viability plans, and both companies made submissions Tuesday.

GM and Chrysler each said they have reached some limited agreements with United Auto Workers.

Under the terms of the existing loan agreement, the companies were supposed to have presented signed term sheets with the union that would cover reductions in wages and benefits as well as alterations to the fund for retiree health care.

But significant labor issues remain.

"The UAW has reached tentative understandings with Chrysler, Ford and General Motors on modifications to the 2007 national agreements," UAW President Ron Gettelfinger says in a written statement. "The changes will help these companies face the extraordinarily difficult economic climate in which they operate."

GENERAL MOTORS' PLAN

JOB CUTS: 10,000 salaried and 37,000 blue-collar positions, amounting to 19 percent of its current global work force of 244,500. A total 26,000 of the cuts will come from outside the U.S. The cuts would take place by the end of this year.

PLANT CLOSINGS: 14 U.S. plants during three years

BRAND LOSSES: If the Hummer unit is not soon sold, it will be eliminated. Saturn could face a similar fate by 2011. It is seeking buyers for the Saab unit. GM will focus on Chevrolet, Cadillac, GMC and Buick, with Pontiac reduced to one or two models.

ADDITIONAL GOVERNMENT FUNDING: $9.1 billion to $16.6 billion, on top of the $13.4 billion already received. GM's request includes a credit line of $7.5 billion to be used if the downturn in the auto industry is more pronounced than expected. Without the additional funding, GM will run out of money in March.

SALES FORECASTS: Dropped from 12 billion to about 10.5 billion

BANKRUPTCY: Had been considered, but the only credit available to finance a reorganization would be from the government, and it could cost as much as $100 billion.

PROFITABILITY GOAL: 24 months, and fully repay the government loans by 2017

CHRYSLER'S PLAN

JOB CUTS: 3,000, or 6 percent of its 54,007 employees

MANUFACTURING CHANGES: Reduce one shift of manufacturing and reduce production capacity by 100,000 vehicles. Launch 24 new fuel-efficient car models in the next 48 months.

BRAND LOSSES: The Aspen, Durango and PT Cruiser will be discontinued.

ADDITIONAL GOVERNMENT FUNDS: $5 billion, on top of the $4 billion already received.

COST REDUCTIONS: Reduce fixed costs by $700 million and sell $300 million worth of additional nonearning assets in the coming year.

SALES FORECAST: 10 million vehicles, down from previous sales volumes of 16 million

BANKRUPTCY: The automaker's 199-page plan included a review of bankruptcy, should the government not come through with additional aid. A Chapter 11 bankruptcy filing would require some $20 billion to $25 billion in debtor-in-possession financing, or else the company would have to liquidate.

PROFITABILITY GOAL: 2012, when the government loans would start to be repaid

UNION NEGOTIATIONS

AGREEMENT: The United Auto Workers union said it has reached a tentative agreement with Chrysler, GM and Ford Motor Co. on modifications to labor contracts. Such concessions were a condition of the government bailout.

TERMS: Terms of the deal were not announced, but they were expected to eliminate the jobs bank in which laid-off workers get most of their pay, as well as make work rule and other changes that the government loan terms set out so the companies' labor costs are competitive with those of their Japanese counterparts that have U.S. factories.

TRUST FUND: The union said talks regarding the fund that will take on retiree health care expenses next year continue. The companies and the union have not come to a final understanding on how the companies should meet their obligations - more than $20 billion - to provide for retiree health care.

NEXT STEPS

VETTING: The restructuring plans will be reviewed by the Obama administration's autos task force. Treasury Secretary Timothy Geithner and Lawrence Summers, director of the National Economic Council, will oversee the panel. Obama's auto industry task force will include Ron Bloom, a restructuring expert and former vice president of investment bank Lazard Freres who has advised the United Steelworkers union, and Diana Farrell, the president's deputy economic adviser who has worked for McKinsey and Goldman Sachs.

BANKRUPTCY: An Obama spokesman said the president would not rule out that option for the automakers.

GENERAL MOTORS' PLAN

CHRYSLER'S PLAN

UNION NEGOTIATIONS

NEXT STEPS

Information from The Associated Press and The Detroit Free Press was used in this report.

Share this:

Loading Comments...

Email Print

ADVERTISEMENT