Automakers Make Their Bailout Pitches

Big 3 Vow To Slash Workers, Exec Pay In Return For Federal Lifeline; GM Seeks $18B To Survive

(CBS/AP)  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.

[joepack61]

Jim Press at Chrysler should explain why his company dropped the Pacifica, a car that was selling 60,000 units a year, got 24 mpg highway, and replaced it with the cookie-cutter Dodge Journey that is smaller and gets less highway gas miliege, and the behemoth Chrysler Aspen. Ford has four vehicles in one segment, the Escape, Edge, Taurus wagon, and the new Flex. Honda has the CRV, Pilot, and Element. GM has multiple cross-overs to hit all tastes and pocketbooks. I guess this concept didn''t cross the mind of Mr. Press, the so-called marketing genius who was hired away from Toyota.

[joepack61]

Not long ago in the 1990s, the Ford Taurus was the best selling sedan, beating out the Toyota Camry. Then a committee at Ford redesigned the Taurus(giving it that goof-ball oval back window was one mistake), ruining it and losing the top spot to the Camry. The Detroit auto companies have been struggling with styling mistakes for years. The Japanes came over here, quickly established design studios in California, hired top designers, and have been kicking Detroits #ss ever since. When Toyota introduced the Lexus brand, at least one model was a style rip-off of a Mercedes sedan. The Civic is now a styling rip-off of BMW. When Ford finally decided to copy Toyota they picked the first model year of the Avalon and made the Ford Five Hundred. Problem was, the huge ratings for the Avalon were based on ride and engineering and all that. Otherwise, the car was borderline ugly. Toyota restyled the Avalon into a look that is shared with the current Camry, and the Five Hundred/Taurus has been described as looking like a sedan from Soviet-era bulgaria.

[bobnjersey]

[DO YOUR OWN RESEARCH. It was KNOWN that if you wanted to pull a shady deal, you went to Andersen.]
[Posted by txgrouch2007 at 05:19 PM : Dec 03, 2008]

known to who?

just because ''you'' say so? i don''t think so.

if you don''t show anything to support your claims ... you just show yourself as the ''its all clintons fault'' troll that you are.

not at all a surprise.

[txgrouch2007]

why don''''t you supply the verification that these accounting regularities were both ''''widely known'''' outside of enron before 2001 ... and any given clinton admin policy promoted these fraudulent policies ... or turned a blind eye to them once they were known.
Posted by bobnjersey at 04:00 PM : Dec 03, 2008

Nice try to confine it to Enron.

It was widespread THROUGOUT THE BUSINESS WORLD. Not just Enron, Worldcomm, Lucent - COUNTLESS companies went to Andersen Accounting to commit fraud.

DO YOUR OWN RESEARCH. It was KNOWN that if you wanted to pull a shady deal, you went to Andersen.

Don''t expect me to convince you. You''ll just reject whatever I say. DO YOUR OWN RESEARCH.

[bobnjersey]

[But somehow Clinton was not to blame for the rampant and WIDELY KNOWN accounting fraud that had occurred ON CLINTON''''S WATCH.]
[Posted by txgrouch2007 at 10:13 AM : Dec 03, 2008]

the original question (from panhandlpete) referred to the disposition of the long term benefits after the failure of the us auto industry. this inquiry contained no reference to any partisan criteria.

my response addressed that question ... without any reference to any partisan criteria.

then you come along with your ''its all clintons fault'' myopia ... whining about how the allegedly ''widely known'' accounting irregularities occurring at enron during the clinton administration were not blamed on clinton.

why don''t you supply the verification that these accounting regularities were both ''widely known'' outside of enron before 2001 ... and any given clinton admin policy promoted these fraudulent policies ... or turned a blind eye to them once they were known.

[acpang-2009]

Are GM, Ford, and Chrysler still giving money to NASCAR ? If they''re begging for money, they shouldn''t be wasting it on racing.

[txgrouch2007]

the pension fund will likely default and the fed govt will bail that out with the structures defined within the ''''Pension Benefit Guarantee Corporation''''. it says it''''s not funded by taxes ... but it will be when enough defaults occur.
Posted by bobnjersey at 10:04 AM : Dec 03, 2008

Is that anything like what happened to the Enron employees who lost their retirement after all the Clinton-era accounting fraud later cost them their 401k''s on the NEXT PRESIDENT''S WATCH.

But somehow Clinton was not to blame for the rampant and WIDELY KNOWN accounting fraud that had occurred ON CLINTON''S WATCH.

Is it anything like that? Then WATCH OUT, OBAMA, they could lose their pension ON YOUR WATCH.

[bobnjersey]

[What happens to the medical and retirement benefits due to those RETIRED auto workers if the BIG 3 fail?]
[Posted by panhandlpete at 08:31 AM : Dec 03, 2008]

they''ll be swept from the table like all the other financial obligations the company has. some obligations may be reconcilable via the sale of assets.

the pension fund will likely default and the fed govt will bail that out with the structures defined within the ''Pension Benefit Guarantee Corporation''. it says it''s not funded by taxes ... but it will be when enough defaults occur.

http://www.pueblo.gsa.gov/cic_text/employ/pension/pension.htm

i don''t believe there''s an equivalent means to mitigate issues w/ unfunded health insurance programs.

they also owe tens of billions to others ... which will also see the same fate in the case of a bankrupcy ... which means these companies/entities wont get paid ... which could lead to their failure.

[txgrouch2007]

OK, I found them. They''re all arguing about God again.

They found something IMPORTANT to talk about.

[txgrouch2007]

Umm - the boards are SO QUIET today. ALL of them.

Is there some big meeting at work this morning? At ALL COMPANIES????

I wouldn''t know. I DON''T WORK FOR A BIG COMPANY ANYMORE.

This is ominous...

[txgrouch2007]

The difference between Democrats and Republicans is that one side rapes while the other side pillages.

[txgrouch2007]

The USA will collapse under its own weight like the Soviet Union did.

It just took us a few more years.

[txgrouch2007]

Over the past few years, we have learned that we didn''''t really need to travel as much as we had been in the past.
Posted by Fiberglass3 at 08:25 AM : Dec 03, 2008

Most business travel is the result of GLOBALIZATION. Now that more things are being made in other countries, businesspersons now have to TRAVEL TO WHERE STUFF IS BEING MADE.

More fuel consumption, more pollution.

[txgrouch2007]

What happens to the medical and retirement benefits due to those RETIRED auto workers if the BIG 3 fail?
Posted by panhandlpete at 08:31 AM : Dec 03, 2008

Why are people falling for the idea that bailouts is the ONLY solution???

Wouldn''t TARIFFS be a better solution than this endless bailout habit?

THEN WHY NOT DO IT???

Oh, you say, it''s too late. Tariffs would take to long to work because the companies would have to SELL SOMETHING first.

Yah, like we''ve needed tariffs for about TEN OR TWENTY YEARS. If we had started them back then, WE WOULDN''T NEED BAILOUTS TODAY.

[txgrouch2007]

Now they are stating that they are going to layoff 1/3 of the US workers and close 1/3 of the US Factories while keeping the Mexican and Canadian Factories open. If they get the Bailouts.
Posted by david393071 at 08:10 AM : Dec 03, 2008

Like I said, they are feeding us to the wolves. AND they want a bailout.

Why is Congress even spending their time on these bums?

Why? Because IT''S A DONE DEAL. The traitors in Congress are just going through this charade to PRETEND they care what the people think, THEN they''ll hand over the booty like they have already decided to do.

And yet people blame THE PRESIDENT.... while Congress has a lower approval rating. BUT MOST OF CONGRESS JUST GOT RE-ELECTED to keep doing this kind of stuff.

Humanity is its own worst enemy.

[panhandlpete]

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.

With all the upcoming employee/job cutbacks which will take place as the economy worsens, fewer and fewer people will be purchasing NEW autos of any make......but the big 3 will still be in business IF congress will give them a BAILOUT.

What happens to the medical and retirement benefits due to those RETIRED auto workers if the BIG 3 fail?

[fiberglass3]

Over the past few years, we have learned that we didn''t really need to travel as much as we had been in the past.

[craigh9]

While it may be difficult to truly lay out specifics in a public forum I still don''t see any IN HAND roll backs in expenses.
Why can''t they provide a % of management positions to be eliminated? They still do not have any UAW agreed decreases IN HAND. Basically, all they have is a promise that we learned something and will downsize to improve - THAT"S NOTHING. The big 3 are HUGELY TOP HEAVY. Their plan should be 1 - 33% reduction in management positions, 2 - 15% reduction in salary/benefits from remaining management positions, 3 - NO BONUSES EVER, unless they are based on actual PROFIT of the company as a whole, 4 - a 15% decrease in salary/benefits from all UAW employees, 5 - a long term plan that doesn''t rely on making profit immediately on electric auotmobiles as that WILL NOT HAPPEN for a number of yeras.
Time for the big 3 to get realistic, if they can''t make the hard decisions and get UAW support now, then chapter 11 is the right solution - scrap all contracts and start over!!!

[david393071]

Now they are stating that they are going to layoff 1/3 of the US workers and close 1/3 of the US Factories while keeping the Mexican and Canadian Factories open. If they get the Bailouts.

[david393071]

We Bailed Out the Financial Institutions so that they could provide these types of Loans and they refuse to loan the Obese 3 any money. What does that say.

If we Bailout the Obese 3, I want all the Corporate Board Members International Money and Property as Collateral. And yes, I would charge them usary interest (credit card interest rates) as allowed by the Delaware Court of Chancery were they are Incorporated:

Delaware: Freddie Mac, Fanny Mae, Bank of America, Wilmington Trust, First USA / Bank One / JPMorgan Chase, AIG, Citigroup, Deutsche Bank, Barclays plc, GM, Chrysler, Wachovia, ExxonMobil, Chevron, ISDA, and those States with Corporations Incorporated at Delaware.

source: Encyclopediae 1990-2007.