By Jason Simpkins
Managing Editor
Money Morning
General Motors Corp. (GM) and Chrysler LLC presented their highly anticipated restructuring plans yesterday (Wednesday), but said they would need as much as $22 billion in additional federal aid to keep their turnaround efforts from stalling.
The new viability plans were part of the bargain automakers struck with Congress in December, when the two U.S. car companies received $17.4 billion in U.S. Treasury Department loans.
GM requested up to $16.6 billion in additional funding, on top of the $13.4 billion it has already received from the government. The automaker said it needs $2 billion by March and $2.6 in April to avoid running out of cash.
GM also wants a $7.5 billion line of credit that could be drawn upon, if needed, and asked to defer repayment of a $4.5 billion credit line due in 2011.
In an effort to cut costs and return to profitability by 2011, GM plans to shutter another five U.S. plants, in addition to nine it closed in December. It will sell or wind down its Hummer and Saturn brands, and said that it was talking to the Swedish government and other parties about making Saab an "independent business entity."
The company will cut its global workforce by 47,000 this year, a figure that includes the 10,000 white-collar job cuts announced last week.
Meanwhile, Chrysler, which received $4 billion in federal loans two months ago, renewed a request for $3 billion of additional aid and said it needs $2 billion to implement its restructuring plan, bringing its total bailout request to $9 billion.
Chrysler's plan includes discontinuing its Chrysler Aspen and Dodge Durango sport-utility vehicles, as well as the once-white-hot PT Cruiser car.
Chrysler has also cut its workforce from 87,000 at the end of 2006 to less than 54,000 now. It has also eliminated 12 shifts at its plants, equal to roughly one-third of its production capacity.
Italy's Fiat S.p.A. (OTC: FIATY) last month agreed to buy a 35% stake in the foundering Chrysler. The deal is expected to boost Chrysler's small-car technology and give Italy-based Fiat access to the U.S. auto market. It will also give Chrysler access to Fiat's global distribution network.
The United Auto Workers union (UAW) said Tuesday that it reached an agreement with GM, Chrysler and Ford Motor Co. on changes to its contracts with each of the car companies.
Ronald A. Gettelfinger, UAW president, said that the changes "will help these companies face the extraordinarily difficult economic climate in which they operate."
News and Related Story Links:
- Financial Times:
US carmakers to seek $21.6bn in funds
- Money Morning:
Obama Administration Kicks the "Car Czar" to the Curb; Treasury's Geithner to Take the Wheel
- Money Morning:
Bankruptcy Looks Increasingly Likely for GM and Chrysler; Nissan to Slash 20,000 Jobs.
- Money Morning:
Ronald A. Gettelfinger.