Big Three survival bailout requests rise to $34B
Humbled and fighting for survival, Detroit's once-mighty automakers appealed to Congress on Tuesday with a retooled case for a bailout as large as $34 bn, pledging to slash work forces, car lines and executive pay in return for a federal lifeline.
By Agencies |
WASHINGTON: Humbled and fighting for survival, Detroit's once-mighty automakers appealed to Congress on Tuesday with a retooled case for a bailout as large as $34 bn, pledging to slash work forces, car lines and executive pay in return for a federal lifeline.
General Motors Corp. and Chrysler LLC said they needed immediate cash infusions to last until New Year's, and warned they could drag the entire industry down if they should fail.
Chrysler said it needed $7 bn by year's end, and General Motors asked for a quick $4 billion as the first installment of as much as $18 bn to stay afloat and weather even worse economic storms.
Ford Motor Co. had a more upbeat report, but the other two members of the U.S. Big Three painted the direst portraits to date, including the prospects of shuttered factories and massive job losses, of what could happen if Congress does not quickly step in.
``Failing to act now will hurt many American families and undermine our country's economic recovery, far outweighing the costs related to supporting an industry that touches every district in every state of the nation,'' Chrysler said.
``There isn't a Plan B,'' said GM Chief Operating Officer Fritz Henderson. ``Absent support, frankly, the company just can't fund its operations.''
New sales figures underscored the seriousness of the situation. U.S. light vehicle sales at General Motors and Chrysler plunged more than 40 percent in November, while Ford's sales dropped 31 percent, battered by an economic storm that has sent consumer demand for new vehicles to lows not seen in decades.
Democratic leaders have said they might call Congress back next week to pass an auto industry bailout, but only if the carmakers' blueprints show they have reasonable plans to stay viable with the help.
Making no commitments, the Democrat speaker of the House of Representatives, Rep. Nancy Pelosi, said Tuesday, ``We want to see a commitment to the future. We want to see a restructuring of their approach, that they have a new business model, a new business plan.'' She said, ``it is my hope that we would'' pass legislation to help the industry.
Senate Majority Leader Harry Reid, also a Democrat, said he would try to jump-start debate Monday on auto bailout legislation. ``We have to make sure we do everything we can to take care of the auto industry,'' he said. ``I hope we can do something.''
At the New York Stock Exchange, nervous investors sent the Dow Jones industrials bouncing up and down all day, but they finished up 270 points, erasing part of Monday's plunge of nearly 680.
All three companies' plans envision the government getting a stake in the auto companies that would allow taxpayers to share in future gains if they recover.
Along with detailed stabilization plans, the auto executives were offering a hefty dose of humility and a host of symbolic concessions designed to repair their images, badly tattered after they arrived in Washington last month on three separate private jets to plead for federal help.
Ford CEO Alan Mulally, GM CEO Rick Wagoner and Chrysler chief Bob Nardelli all planned to road-trip the 520 miles from Detroit to Washington in fuel-efficient hybrid cars for hearings on Thursday and Friday.
Mulally and Wagoner both said they would work for $1 per year, which Chrysler's plan said Nardelli already does, if their companies took any government loan money, while Ford offered to cancel management bonuses and salaried employees' merit raises next year, and GM said it would slash top executives' pay. Ford and GM both said they would sell their corporate aircraft.
General Motors Corp. and Chrysler LLC said they needed immediate cash infusions to last until New Year's, and warned they could drag the entire industry down if they should fail.
Chrysler said it needed $7 bn by year's end, and General Motors asked for a quick $4 billion as the first installment of as much as $18 bn to stay afloat and weather even worse economic storms.
Ford Motor Co. had a more upbeat report, but the other two members of the U.S. Big Three painted the direst portraits to date, including the prospects of shuttered factories and massive job losses, of what could happen if Congress does not quickly step in.
``Failing to act now will hurt many American families and undermine our country's economic recovery, far outweighing the costs related to supporting an industry that touches every district in every state of the nation,'' Chrysler said.
``There isn't a Plan B,'' said GM Chief Operating Officer Fritz Henderson. ``Absent support, frankly, the company just can't fund its operations.''
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New sales figures underscored the seriousness of the situation. U.S. light vehicle sales at General Motors and Chrysler plunged more than 40 percent in November, while Ford's sales dropped 31 percent, battered by an economic storm that has sent consumer demand for new vehicles to lows not seen in decades.
Democratic leaders have said they might call Congress back next week to pass an auto industry bailout, but only if the carmakers' blueprints show they have reasonable plans to stay viable with the help.
Making no commitments, the Democrat speaker of the House of Representatives, Rep. Nancy Pelosi, said Tuesday, ``We want to see a commitment to the future. We want to see a restructuring of their approach, that they have a new business model, a new business plan.'' She said, ``it is my hope that we would'' pass legislation to help the industry.
Senate Majority Leader Harry Reid, also a Democrat, said he would try to jump-start debate Monday on auto bailout legislation. ``We have to make sure we do everything we can to take care of the auto industry,'' he said. ``I hope we can do something.''
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At the New York Stock Exchange, nervous investors sent the Dow Jones industrials bouncing up and down all day, but they finished up 270 points, erasing part of Monday's plunge of nearly 680.
All three companies' plans envision the government getting a stake in the auto companies that would allow taxpayers to share in future gains if they recover.
ADVERTISEMENT
Along with detailed stabilization plans, the auto executives were offering a hefty dose of humility and a host of symbolic concessions designed to repair their images, badly tattered after they arrived in Washington last month on three separate private jets to plead for federal help.
Ford CEO Alan Mulally, GM CEO Rick Wagoner and Chrysler chief Bob Nardelli all planned to road-trip the 520 miles from Detroit to Washington in fuel-efficient hybrid cars for hearings on Thursday and Friday.
Mulally and Wagoner both said they would work for $1 per year, which Chrysler's plan said Nardelli already does, if their companies took any government loan money, while Ford offered to cancel management bonuses and salaried employees' merit raises next year, and GM said it would slash top executives' pay. Ford and GM both said they would sell their corporate aircraft.
The executives are going out of their way to show deference to lawmakers and a willingness to flog themselves for past mistakes. ``I think we learned a lot from that experience,'' Mulally told The Associated Press in an interview in Detroit, Michigan, the heart of the U.S. auto industry.
Ford, in far better shape than GM and Chrysler, asked for a $9 billion standby line of credit to stabilize its business but said it did not expect to tap the funds unless one of Detroit's other Big Three declared bankruptcy. Its plan projected Ford would break even or turn a pretax profit in 2011.
The company plans to cut its number of dealers by more than 600, to 3,790 by the end of the year.
The unions were preparing to make sacrifices as well. Leaders of the United Auto Workers summoned local union leaders from across the country to an emergency meeting Wednesday in Detroit to discuss possible concessions. Up for discussion were the possibility of scrapping a much-maligned jobs bank in which laid-off workers would keep receiving most of their pay and postponing the automakers' payments into a multibillion-dollar union-administered health care fund.
U.S. automakers are struggling to stay afloat heading into 2009 under the weight of an economic meltdown, the worst auto sales in decades and a tight credit market. The three burned through nearly $18 billion in cash reserves during the past quarter.
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Ford's recovery blueprint said it would invest $14 billion over the next seven years to boost its vehicles' fuel efficiency and would improve the overall efficiency of its fleet by an average of 14 percent next year. The company plans to speed its rollout of electric and hybrid gas-electric vehicles. Ford also is suggesting a partnership among automakers, parts suppliers and the government to develop new battery technologies domestically, so the United States does not have to rely on foreign batteries, as it now does on foreign oil, to power its cars.
Besides cutting its number of dealers, it will trim its major sourcing suppliers by more than half, to 750 from 1,600.
GM said it would make huge cuts in its numbers of workers as well as reductions in its vehicle brands and plants by 2012. The auto giant is seeking a $12 billion loan to keep it running, plus a $6 billion line of credit in case market conditions worsen.
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GM would focus on four brands _ Chevrolet, GMC, Buick and Cadillac. By 2012, the plan forecasts 20,000 to 30,000 fewer workers, a reduction of nine facilities and 1,750 fewer dealers. The company also outlined efforts to negotiate swapping some of the company's debt for equity stakes in the automaker. Chrysler said it would cut costs by slashing employee benefits, including suspending its match portion of the 401(k) retirement plan and reducing its health care contribution for salaried workers, and terminating its lease car program. It said it would also ask more productivity of each employee.
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Chrysler's product plan includes the first full-function electric-drive model in 2010 and expansion to additional models by 2013. The company's market penetration of electric-drive vehicles will increase further with more than 500,000 produced by 2013, the blueprint said. GM, according to its quarterly report filed with the Securities and Exchange Commission, owes creditors $45 billion, and it must pay more than $7.5 billion early in 2010 to a union-administered trust fund that will take over retiree health care payments.
Ford owes more than $26 billion, with $6.3 billion due to its own union trust fund at the end of 2009. Chrysler, a private company, does not have to open its books, but its CEO, Nardelli, has said it would be difficult for the company to make it without federal aid. All three probably are negotiating with the United Auto Workers union for delays in payments to the trusts.
The companies are resisting calls that they file for bankruptcy, arguing that no one would buy a car from an automaker that might not survive the life of the vehicle.
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