Automakers Make Their Bailout Pitches
Humbled and fighting for survival, Detroit's once-mighty automakers appealed to Congress with a retooled case for a huge bailout Tuesday, pledging to slash workers, car lines and executive pay in return for a federal lifeline. GM said it wouldn't last till New Year's without an immediate $4 billion and could drag the entire industry down if it fails.
General Motors Corp., asking for as much as $18 billion to keep afloat and survive even worse economic storms, painted the direst portrait to date of what could happen if Congress doesn't quickly step in.
"There isn't a Plan B," said Chief Operating Officer Fritz Henderson. "Absent support, frankly, the company just can't fund its operations." Without help, the company warned, "the company will default in the near term, very likely precipitating a total collapse of the domestic industry and its extensive supply chain, with a ripple effect that will have severe, long-term consequences to the U.S. economy."
On the assembly line, autoworkers are bracing for the worst, reports CBS News correspondent Anthony Mason.
"You know you are seeing the company basically going through a meltdown. It's pretty frightening," one auto worker said.
And business keeps getting bleaker. GM's sales fell more than 40 percent for the second straight month and Chrysler was down 47 percent in November, reports Mason. Ford, Toyota and Honda all were off more than 30 percent.
"This is an incredibly weak market," Rebecca Linland of Global Insight told Mason. "They're getting no revenue at all. And all of the manufacturers are really suffering - not just confined to the Big Three."
CBS News correspondent Ben Tracy reports that nationwide, 750 dealerships have already closed this year and 150 more are expected to shut down in the next four weeks - putting nearly 40,000 employees out of work.
Democratic leaders have said they might call Congress back next week to pass an auto bailout - but only if the carmakers' blueprints show the Big Three have reasonable plans to stay viable with the help.
Making no commitments, House Speaker 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.
All three 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 up 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 to Washington in fuel-efficient hybrid cars for hearings on Thursday and Friday.
Mulally and Wagoner both said they'd work for $1 per year if their firms 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. 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.
Ford Motor Co., in far better shape than GM and Chrysler LLC, asked for a $9 billion "standby line of credit" to stabilize its business but said it didn't expect to tap the funds unless one of Detroit's other Big Three went bust. 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. United Auto Workers leaders 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 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. GM, Ford and Chrysler went through nearly $18 billion in cash reserves during the past quarter, and GM and Chrysler have said they could collapse in weeks.
Ford's recovery blueprint said it would invest $14 billion over the next seven years to boost its vehicles' fuel efficiency, and it said it 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.
And Ford is calling for a partnership among automakers, parts suppliers and the government to develop new battery technologies domestically, so the U.S. doesn't 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.
GM would focus on four brands - Chevrolet, GMC, Buick and Cadillac. By 2012, the plan calls for 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 was expected to outline changes that would include a swap of debt in the company for equity stakes and reductions in some vehicle models, according to a person who was briefed on the plan. The person spoke on condition of anonymity because the discussions were private.
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 UAW-administered trust fund that will take over retiree health care payments.
Ford owes more than $26 billion, with $6.3 billion due to its UAW 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 likely are negotiating with the UAW 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.