Post by Queen of the Damned on Feb 17, 2009 20:57:22 GMT -5
By John Hughes and Jeff Green
Feb. 17 (Bloomberg) -- General Motors Corp. said it needs as much as $16.6 billion in new U.S. loans, more than doubling the aid to date, and must get some of the cash next month to survive. GM plans 47,000 more job cuts worldwide this year.
Chrysler LLC, propped up like GM with federal assistance, said it’s seeking $5 billion more from the government and will shed 3,000 more positions.
The automakers met a deadline today to report progress in revamping operations with $17.4 billion in loans granted so far, and now they must show the U.S. by March 31 that they can become profitable and be allowed to keep the money. Along with Ford Motor Co., they got a boost when the United Auto Workers said it reached tentative agreements to help trim labor expenses.
A request for more aid “was inevitable,” said Jim Hossack, an analyst at consulting firm AutoPacific Inc. in Tustin, California. “It’s because sales in January were less than anyone expected.”
GM’s retrenchment includes closing 5 more U.S. plants by 2012; selling or shutting down the Hummer unit by the end of next month; and chopping salaries by as much an additional 30 percent for the four-most senior officers after Chief Executive Officer Rick Wagoner, who already is working for $1 a year.
Bankruptcy Scenarios
The biggest U.S. automaker said it examined three bankruptcy scenarios, with price tags of as much as $100 billion, and that all were less-favorable options than a rescue.
At least $9.1 billion more in loans is needed to finish restructuring, GM said, and that sum could rise to $16.6 billion should the economy worsen. Detroit-based GM has received $13.4 billion since December.
Production of Saturn cars would stop in 2011, if the brand hasn’t been sold, GM said. Should dealers or other investors present a proposal, GM “would be open” to a spinoff or sale, according to the Detroit-based automaker’s viability plan.
The Saab unit may have to be restructured under Swedish bankruptcy laws without government support there, GM said.
Chrysler said it needs an additional $5 billion March 31 after receiving an initial installment of $4 billion. The new job cuts at the third-largest U.S. automaker would be in addition to 32,000 shed through the end of last year.
Worsening Outlook
The worst U.S. auto market since the early 1980s helped drag GM and Chrysler to the brink of collapse and now is hampering their recovery, with domestic sales last month plunging 49 percent at GM and 55 percent at Chrysler. Should the loans be recalled, the money could be used to force the companies into restructuring in bankruptcy.
“We appreciate the effort that these companies and their stakeholders have made,” White House press secretary Robert Gibbs said in a statement. President Barack Obama’s administration “will be reviewing these reports closely in the days ahead.”
GM and Chrysler again rebuffed the idea of a bankruptcy filing, which Gibbs had said earlier he couldn’t rule out.
“All research indicates bankruptcy would have a dramatic impact on GM sales and revenue,” GM said in its 117-page plan, citing a study that concluded 80 percent of consumers wouldn’t buy a car from a bankrupt company. “A restructuring process outside of bankruptcy is highly preferable,” GM’s report said.
‘Unbearable Stress’
Bankruptcy “would create unbearable stress not only for our suppliers, but also the suppliers of other automakers,” Chrysler Chief Executive Officer Robert Nardelli in a briefing with reporters. “It would have a cataclysmic effect on the entire auto industry.”
Liquidating the Auburn Hills, Michigan-based automaker might cost 2 million to 3 million jobs, according to Chrysler’s plan.
GM fell 3.7 percent to $2.10 at 4:51 p.m. after regular New York Stock Exchange composite trading. Earlier, the shares sank 32 cents, or 13 percent, to $2.18, extending their decline over the past year to 92 percent. Chrysler is controlled by Cerberus Capital Management LP.
To meet loan requirements, GM and Chrysler have been trying to persuade the UAW to accept equity instead of cash for half of next year’s scheduled payments into union-run retiree health- care funds.
Discussions are continuing over how the companies will finance those trusts, the UAW said in an e-mailed statement announcing the preliminary agreement on other contract terms. Lower-cost labor contracts would help GM, Chrysler and Ford trim expenses.
Chrysler President Tom LaSorda said the labor savings are enough to keep the federal loans.
‘Competitive Parity’
The accord lowers labor costs to “competitive parity” with expenses at the U.S. factories of overseas automakers, Joe Hinrichs, Ford’s group vice president for manufacturing and labor affairs, said in a statement.
GM also is required by the government to cut two-thirds of its $27.5 billion in unsecured public debt to $9.2 billion, and the company has been in talks with bondholders.
GM’s 8.375 percent bonds due in July 2033 slid 0.63 cent to 15.13 cents on the dollar, yielding 55.1 percent, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority.
GM’s pension plans were underfunded by $12 billion to $13 billion as of Dec. 31, according to the company’s report. GM may need to make “significant contributions” to its plan for hourly workers in 2013 or 2014, according to the presentation.
Talks are under way with the governments of Canada, Germany, the U.K., Sweden and Thailand to obtain about $6 billion in aid by 2010, GM said. The automaker, which has relied on overseas revenue to counter sagging North American sales, said it would need additional funds “to sustain certain operations outside the U.S.”
GM said the global recession forced it to suspend plans for mid-size pickup and diesel engine production in Thailand, and will halt an expansion project in India because sales are lagging behind estimates. In Europe, GM has a target of slicing $1.2 billion in costs.
To contact the reporters on this story: John Hughes in Washington at jhughes5@bloomberg.net; Jeff Green in Southfield, Michigan at jgreen16@bloomberg.net
Last Updated: February 17, 2009 19:59 EST
This pisses me off. Why are the executives being laid off?
