General Motors Seeks Up To $30B In Aid, Plans To Cut 47,000 Jobs
DETROIT — General Motors Corp., presenting a dire outlook for the future, said Tuesday it may need $30 billion in total government financing to weather the economic downturn and would cut 47,000 jobs worldwide and shutter five more U.S. factories in a massive restructuring plan.
The job cuts, which would take place by the end of this year, include 10,000 salaried and 37,000 blue-collar positions, amounting to 19 percent of the company's current global work force.
GM is already surviving on $13.4 billion in federal loans and said in a 117-page plan submitted to the Treasury Department that it would seek an additional $16.6 billion if economic conditions worsen, but it could achieve profitability in two years and fully repay its loans by 2017.
The U.S. automaker presented its turnaround plan as it worked to win concessions from the United Auto Workers union and bondholders to dramatically resize the company. The UAW said it reached a tentative deal with GM, Chrysler LLC and Ford Motor Co. on contract changes, but discussions were still under way about how the companies would fund union-run trust funds that will take over the companies' retiree health care obligations starting next year.
GM said it was making progress but had not yet achieved all the concessions from union workers, lenders, dealers and suppliers that the Bush administration sought in the loan terms provided last December.
Chief Financial Officer Ray Young said the company hopes to exchange two-thirds of its roughly $28 billion in unsecured bond debt by the end of March in order to meet the loan terms.
Bondholders, he said, signed a letter saying that they were making progress with the company. The UAW also signed a similar letter saying progress had been made on the health care trust fund. The terms of the loan suggest that GM make half of the required $20 billion in payments to the fund as company stock instead of cash.
Young said the talks have reached a critical stage.
"At this juncture we feel we can make progress" and meet requirements to finalize the deals by March 31, he said.
President Barack Obama's administration will review the plans from GM and Chrysler LLC but could pull the loans if they don't approve the turnaround plans by then. The review could be extended into April, but if the government demands the money back it would force the companies into bankruptcy.
Chairman and CEO Rick Wagoner said the plan submitted Tuesday is more aggressive than the one presented to the government in December because besides U.S. sales plummeting to a 26-year low, the global economy and auto sales worldwide have deteriorated since then.
"Today's plan is significantly more aggressive because it has to be," Wagoner told reporters Tuesday night. "We have taken stronger actions, we needed to."
In December, GM said it might need a total of $18 billion in government financing but only got a commitment of $13.4 billion, including $4 billion that the automaker received Tuesday.
GM predicted it could run out of money next month and said it wants to receive an additional $2 billion in March and an additional $2.6 billion in April.
The company has a $4.5 billion revolving line of credit that must be refinanced in 2011 but now believes that private funding won't be available, so the automaker is asking the government to lend the money.
If market conditions deteriorate, GM says it may also need an additional $7.5 billion revolving line of credit to stay afloat, for a total potential request of $30 billion.
Chief Operating Officer Fritz Henderson said the company explored three bankruptcy scenarios, all of which would cost the government more than $30 billion.
The government, he said, is the only place the company could get financing for a Chapter 11 reorganization, because the credit markets are frozen. The worst-case bankruptcy scenario would cost the government $100 billion, Henderson said, because revenue would severely drop.
He said there is not a lot of research about whether people would buy cars from an automaker in bankruptcy protection, but "that which is there suggests that sales fall off a cliff."
GM's plan details extensive cuts. Of the 47,000 jobs to be slashed, 26,000 will be outside the U.S. The new plan has the U.S. work force declining from about 92,000 hourly and salaried employees at the end 2008 to 72,000 by 2012.
In its Dec. 2 plan to the Bush administration, GM said it would cut the number of plants from 47 in 2008 to 38 by 2012. But the new blueprint goes further, cutting an additional five plants by 2012 to a total of 33 facilities. GM didn't identify which plants will be closed.
GM would further reduce the number of vehicle models. The plan envisions a reduction in nameplates from 48 in 2008 to 36 by 2012. That's four fewer models than in the December plan.
GM said all of its major U.S. vehicle launches from 2009 to 2014 would be high-mileage cars and crossovers.
GM's eight brands would be reduced to four core lines _ Chevrolet, Buick, Cadillac and GMC _ as the automaker said in December. But the company said Pontiac also would remain as "a highly focused niche brand."
GM, which has been reviewing the Saab brand and offered it for sale, said the Swedish unit could file for bankruptcy later this month. GM said it is requesting support from the Swedish government prior to any sale, and the company has developed a proposal that would cap GM's financial support with Saab's operations becoming an independent business by January 2010.
Wagoner said the company is still talking to potential buyers for the Hummer brand.
"We're going to try to draw that to a conclusion one way or another by the end of March," he said.
The Saturn brand, meanwhile, will remain in operation through the end of 2011. GM said it's open to the possibility of a plan from retailers or investors that would allow a spin-off or sale of Saturn.
GM would significantly accelerate the number of gas-electric hybrids and plug-in hybrid cars. It plans to offer 14 hybrids and plug-ins by 2012 and 26 by 2014, when alternative-fuel vehicles are expected to account for 65 percent of sales.
Included in the projection is the plug-in Chevrolet Volt, due in showrooms by late 2010, and two additional vehicles sharing the Volt's extended-range electric vehicle technology.
GM, however, is scaling back its anticipated fuel economy gains, a metric closely watched by environmentalists in Congress. GM said it will meet federal fuel efficiency standards through the 2015 model years, but the progress will be slower.
The Dec. 2 plan said its car fleet average would reach 37.3 miles per gallon by 2012 compared with 31.6 in 2008. But GM now predicts its car fleet will reach 33.7 mpg by 2012 and not surpass 38 mpg until 2014.
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Associated Press Writer Ken Thomas reported from Washington.
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On the Net:
Treasury Department Web site with automaker restructuring plans: http://www.treasury.gov/initiatives/eesa/
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TOM KRISHER and KEN THOMAS | February 17, 2009 08:14 PM EST |
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