GM, Chrysler Boost Aid Requests
General Motors and Chrysler asked the government for an additional $14 billion in aid, a dramatic acknowledgment that conditions in the U.S. auto industry have grown significantly worse in just two months.
GM presented a survival plan that also calls for cutting a total of 47,000 jobs globally and closing five more U.S. factories. That represents the largest work force reduction announced by a U.S. company in the economic downturn. Chrysler said it will cut 3,000 more jobs and stop producing three vehicle models.
Meanwhile, the United Auto Workers union said it has reached a tentative agreement with GM, Chrysler and Ford on modifications to labor contracts. Such concessions were also a condition of the government bailout.
But the union was unable to make a deal with the Big Three on funding for a trust fund that will take over retiree health care costs starting next year.
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 their Japanese counterparts that have U.S. factories.
Union President Ron Gettelfinger said in a statement that discussions are continuing with all three companies about billions of cash payments into the trust funds, called voluntary employees beneficiary associations.
GM said it could need up to $30 billion from the Treasury Department, up from a previous estimate of $18 billion. That includes $13.4 billion previously allocated and $9.1 billion in new loans. The world's largest automaker said it could run out of money by March without new funds.
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. But the automaker claimed it could be profitable in two years and fully repay its loans by 2017.
CBS News correspondent Anthony Mason reports that GM's survival plan is to sell or shut down its Saturn and Hummer bands.
GM is also trying to get its bondholders to accept about 30 cents on the dollar for its $27 billion in outstanding debt, reports Mason.
"It's better than nothing," says auto analyst Rebecca Lindland. "And that's really the alternative that we're looking at is if GM and Chrysler go bankrupt, nobody gets anything."
Chrysler LLC requested $5 billion in new loans on top of the $4 billion it received in December. The company had said it might need an extra $3 billion.
If time is running out for Chrysler, you may not be able to tell at its company headquarters, reports Mason. The company removed most of the clocks to save $20,000 a year on batteries.
It's also removed half of the 80,000 light bulbs to save $400,000 a year and turned down the temperature in hallways by four degrees to save $70,000 a year, reports Mason.
Both requests were part of restructuring plans the two automakers owed the government in exchange for earlier loans.
Ford, which borrowed billions from private sources before credit markets tightened, has said it can make it through 2009 without government help.
The restructuring plans must be vetted by the Obama administration's new autos task force. In a sign the administration views the U.S. steel industry as a case study for revamping the auto industry, one of the task force's appointees played a key role in the reshaping of that industry earlier this decade.
President Barack Obama's top spokesman told reporters aboard Air Force One on Tuesday that he wouldn't rule out bankruptcy for the Detroit automakers.
To prove they can survive as viable companies, both Chrysler and GM need to sharply reduce costs, leading to both companies' job cut announcements.
The GM job cuts include 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.
The new plan has the U.S. work force declining from about 92,000 hourly and salaried employees at year-end 2008 to 72,000 by 2012.
GM Chairman and CEO Rick Wagoner said the plan submitted Tuesday is more aggressive than the one presented to the government on Dec. 2 because the global economy and auto sales have deteriorated in the time that has passed since then.
"Today's plan is significantly more aggressive because it has to be," Wagoner told reporters. "We have taken stronger actions, we needed to."
Chrysler had 54,007 employees at the end of 2008, so Tuesday's cuts would equal about 6 percent.
Chrysler said it now projects that automakers will sell 10.1 million vehicles in the U.S. this year, the lowest level in four decades.
Chrysler Vice Chairman and President Jim Press said in a conference call with reporters that the company will eliminate the Dodge Aspen, Durango and Chrysler PT Cruiser.
Employees at a GM plant in Michigan got word it will close months earlier than planned, reports Mason.
"Here I am, 46 and been working there for 20 years," said employee Lori Davis. "And I think, 'Now what?'"
The plans still have to be vetted by Treasury and the new autos task force announced by the Obama administration Sunday night.
The news came on a day when President Barack Obama signed into law a massive economic recovery plan. Signs that the recession is deepening were more immediate for investors, however, and they dumped stocks and pushed oil prices sharply lower.