Auto Restructuring Has Communities On Edge
For one community, the map tells the story of its dependence on the U.S. automotive industry.
At Warren's heart is General Motors Corp.'s one-square-mile Tech Center. To its south is a GM transmission plant. South of that are two Chrysler LLC facilities.
The facilities and overall industry represent 15 percent of the Detroit suburb's roughly $100 million fiscal budget. So Warren Mayor Jim Fouts was on edge Tuesday GM and Chrysler submitted restructuring plans to the federal government that includes factory closures.
Communities such as Warren with major automotive operations are used to feeling tension these days, with the constant drumbeat of plant shutdowns, closures and blue-collar and white-collar layoffs. But they are steeling themselves for more tough blows from the U.S. auto industry, whose sales are at a 26-year low.
GM and Chrysler told the Treasury Department they plan to cut a total of 50,000 workers and even with sweeping cuts, the two companies will need more bailout money to stave off bankruptcy, reports CBS News business correspondent Anthony Mason.
GM says it could need another $16.5 billion in emergency government loans. Chrysler, which is cutting 3,000 jobs, is asking for another $5 billion because of what it calls "the unprecedented economic decline."
"And now they're really in the ICU," auto analyst Rebecca Lindland told CBS News. "I mean we are looking at two companies that are on life support basically."
Sales for GM, Chrysler and Ford Motor Co. were each down more than 40 percent in January, reports Mason.
GM's survival plan calls for cutting 47,000 jobs - nearly 20 percent of its global workforce - closing five more plants and selling or phasing out its Saturn, Hummer and Saab brands. The company is expected to release the details of its own restructuring plan soon. GM has received $13.4 billion in government loans - $4 billion of that on Tuesday.
GM is likely to seek more money, at least up to the $18 billion that it requested from Congress in December under its worst-case scenario projections. That scenario has arrived with U.S. sales at a 26-year low and auto sales dropping in other parts of the world, a person briefed on GM's plan said.
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.
Meanwhile, the United Auto Workers union said it has reached a tentative agreement with Chrysler, GM and Ford on modifications to existing labor contracts.
Read highlights of General Motors' and Chrysler's viability plans
The UAW said discussions are continuing regarding the union-run trust fund that will take on retiree health care expenses starting next year. Under terms of the government loans, both Chrysler and GM are required to reach concessions with the UAW and debt holders.
Fouts said he doesn't know how the plan will affect his city. But he says residents overall are feeling "fatigue based on fear."
"It's almost overwhelming the amount of bad economic news that my citizens have had to contend with," he said.
"People are tight right now, hanging in. They're worried about having to pay their bills and whether their home is going be foreclosed. People are frozen in time right how ... hoping the (federal) rescue will allow them to be thawed out."
The same wish comes from a GM employee and union official in Shreveport, La., where an assembly plant employs about 800 workers. The plant shut down in December in a cost-cutting move, and now they're waiting to hear if the plant is in danger of closing for good.
"Whatever happens, we'll just have to deal with it," said Morgan Johnson, president of the United Auto Workers Local 2166, who has worked for GM for 28 years.
"We're looking forward to the day the economy improves and people start buying cars. We hope and pray that the policies coming out of Washington will help."
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.
GM and Chrysler have until the end of March to finalize their viability plans. If the new auto industry task force isn't satisfied with them, the government could call back the loans, which would force them into bankruptcy.