General Motors today asked for up to $30 billion in federal aid through 2011, while Chrysler LLC asked for an additional $2 billion beyond what has already been committed to it as the automakers submitted interim plans for turning their operations around.
Both companies submitted their reports to the Treasury Department detailing how they intend to spend the money authorized late last year and additional aid to avoid having to file for bankruptcy.
General Motors has already received $13.4 billion, including a $4 billion infusion today. The new funding request of about $16 billion includes $7.5 billion in credit in case the depression in the automobile market continues.
GM said it plans to cut its workforce by 47,000 hourly and salaries jobs by 2012, with 20,000 of those cuts affecting U.S. workers.
GM also will decide by March 31 whether to sell or phase out its Hummer brand; has offered to sell its Saab brand; and will spin off, sell or phase out its Saturn brand after the current product lifecycle expires after 2011.
GM CEO Rick Wagoner called today's interim plan a "comprehensive and bold update" to discussions that began last year on how to make the largest U.S. auto company profitable. Wagoner said the company is trying to avoid filing for bankruptcy, which he said would be a "highly risky and costly process."
The company has closed 12 U.S. manufacturing facilities since 2000 and will close another 14 facilities by 2012, five more than were included in its initial Dec. 2 restructuring plan.
Discussions between GM and the United Auto Workers and bondholders to reduce its labor costs and debt are ongoing. "There's good process in both of those areas and more to do," Wagoner said.
The UAW announced it has reached "tentative understandings" with all of the Big Three auto companies on changes to agreements made in 2007.
"The changes will help these companies face the extraordinarily difficult economic climate in which they operate," according to a UAW statement.
House Speaker Pelosi, who along with Senate Majority Leader Reid urged automakers in a letter last week to offer serious plans, said the plans represent "the next step in what has been a difficult and disappointing chapter for the American economy, but I hope will become the transformation of our domestic automobile industry into a viable, technologically advanced, and globally competitive manufacturing force."
Discussions are still continuing between with Chrysler, General Motors and Ford regarding how the companies will continue to help pay for health benefits for retirees, the UAW statement said.
This is considered a main sticking point before either Chrysler or GM can send their final proposals to Treasury by March 31.
Ford has not yet sought federal assistance, but wants to structure
its labor and other
agreements based on what is agreed upon with Chrysler and GM.
In a statement, Jim Hinrichs, Ford's vice president for global manufacturing and labor affairs, said the company and UAW reached a tentative labor agreement Sunday afternoon that includes "modified provisions on labor costs, benefits and operating practices that allow Ford to reach competitive parity with foreign-owned automakers' manufacturing operations in the U.S." Neither UAW nor Ford said they will offer details until an agreement is reached regarding the retiree health benefits.
Chrysler's viability plan includes cutting 3,000 jobs this year and discontinuing three SUVs -- starting with the PT Cruiser this summer and continuing with the Chrysler Aspen and Dodge Durango.
Chrysler Chairman and CEO Bob Nardelli said in a conference call that the additional $2 billion requested by the company is needed due to the worsening economy since an initial $7 billion federal aid agreement in December.
"We have continued to see an unprecedented decline in the automotive sector," Nardelli said. The company has received $4 billion so far.
Chrysler is now projecting a 40-year industry low in wholesale orders this year, resulting in roughly $18 billion in lost revenue and a $3.6 billion decline in cash inflows during the next four years.
The company announced it has reached at least a fundamental agreement with the UAW, dealers, suppliers and lien lenders over limiting labor costs and debt.
This includes reducing fixed costs by $700 million this year and reducing a manufacturing shift. The company also said it anticipates debt bondholders to agree to convert all of the company's debt to equity and Chrysler's plan today further assumes the company will reduce its outstanding debt by $5 billion.
Chrysler is also planning to launch 24 new vehicles in 48 months, including its first electric-drive vehicle in 2010.
There was skepticism earlier in the day whether Chrysler and GM would be able to reach a deal with the UAW and bondholders, with auto industry lawmakers toning down expectations.
"I don't think the expectation is a final deal but the expectation is seriousness and substantial progress," Rep. Sander Levin, D-Mich, said in an interview before the plans were announced.
The two companies need to finalize their viability plans by March 31 in order to determine whether they will receive additional federal aid or whether the Obama administration will force them to file for bankruptcy in order to finish restructuring.
White House Press Secretary Robert Gibbs told reporters on board Air Force One en route to Denver today that bankruptcy remains an option.
"I wouldn't close the door, I wouldn't preclude policy choices, particularly since we haven't seen the details on what they think is ultimately going to be most helpful for them," Gibbs said before the companies unveiled their reports.
But Gibbs said Obama wants to "see a strong and vibrant auto industry."
The two proposals will be reviewed by an administration task force led by Treasury Secretary Geithner and National Economic Council Director Lawrence Summers.
Sen. Carl Levin, D-Mich., this week criticized the timing of the announcement over the weekend to do a task force instead of appointing a "car czar" because it made it more challenging for GM and Chrysler to finish their status reports by today.
But his brother, Rep. Levin, said it will ultimately be harmless. "It would have been better earlier but I don't think in the end it will affect the outcome," he said.
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