Auto Industry Needs More Money
Posted: Wed Feb 18, 2009 12:54 am
SourceDETROIT (AP) -- The U.S. auto industry needs even more help from the government to survive than originally thought. General Motors on Tuesday said it could need up to $30 billion from the Treasury Department to keep operating. Included in that amount is $13.4 billion the company has already received. Previously, GM had said it could need as much as $18 billion.
General Motors Corp. and Chrysler LLC said Tuesday they'll need billions more in government loans than they predicted just two months ago. The two automakers also plan further job cuts and additional curtailment of auto production.
Both companies plan to reduce the number of models they offer to car buyers over the next few years.
Meanwhile, the United Auto Workers union said it has reached a tentative agreement with Chrysler, GM and Ford Motor Co. on modifications to existing labor contracts.
Acknowledging that industry conditions are worse than expected when it made the case in December for a government bailout, GM said it could run out of money by March without new funds from the government. The latest request includes $9.1 billion in new loans and a $7.5 billion credit line.
Chrysler requested an additional $5 billion from Treasury. It originally said it would need $3 billion more. The company had already received $4 billion.
GM's survival plan also calls for the cutting of a total of 47,000 jobs and the closing of five more U.S. factories. Chrysler said it will cut 3,000 more jobs and stop producing three vehicle models.
Auburn Hills, Mich.-based Chrysler said the economy and the market for new cars has deteriorated significantly since its initial request. 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.
Ford, which borrowed billions from private sources before credit markets tightened, has said it can make it through 2009 without government help.
The plans still have to be vetted by Treasury and the new autos task force announced by the Obama administration Sunday night. Details were unveiled 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.
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.
"The changes will help these companies face the extraordinarily difficult economic climate in which they operate," UAW President Ron Gettelfinger said in a statement released by the union.
GM has previously outlined reductions to both its hourly and salaried work force and has said it plans to cut back to four vehicle brands from eight.
President Obama's top spokesman told reporters aboard Air Force One on Tuesday that he wouldn't rule out bankruptcy for the Detroit automakers. Robert Gibbs said the administration looks forward to reviewing General Motors and Chrysler's restructuring plans.
House Speaker Nancy Pelosi, D-Calif., said she was hopeful the plans would help lead to the "transformation of our domestic automobile industry into a viable, technologically advanced, and globally competitive manufacturing force."
She said "Congress looks forward to working with the Obama Administration" to make the domestic auto sector competitive "while ensuring accountability to the taxpayers."
Jesus. Another 47,000 jobs? I'm getting the impression they understated the problem when they asked for help the first time.
