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GM, Chrysler Seek Additional $22 Billion

By TOM KRISHER and KEN THOMAS

posted: 279 DAYS 11 HOURS AGO

comments: 2678

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DETROIT (Feb. 18) -Billions of dollars in government loans to prop up General Motors and Chrysler won't be enough. The companies, which have received $17.4 billion so far, filed plans with the government more than doubling that request to a staggering total of $39 billion.

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The requests, made in government-required restructuring plans filed Tuesday, were accompanied by plans for thousands more job cuts, slashing of models and brands, union concessions and the prospect of even further expense cuts.

In a dramatic acknowledgment that conditions in the U.S. auto industry have grown significantly worse in just two months, GM alone said it would cut 47,000 jobs globally by the end of the year — 19 percent of its work force. It also said it would close five more U.S. factories, although it did not identify them.

Chrysler said it will cut 3,000 more jobs and stop producing three vehicle models.

The grim reports came as the United Auto Workers union said it had reached a tentative agreement with GM, Chrysler and Ford Motor Co. on contract changes. Concessions with the union and debt-holders were a condition of the government bailout.

GM said it could need up to $30 billion from the Treasury Department, up from a previous estimate of $18 billion. That includes $13.4 billion the company has already received. The world's largest automaker said it could run out of money by March without new funds and needs $2 billion next month and another $2.6 billion in April.

"We have a lot of work to do," General Motors Corp. Chairman and Chief Executive Rick Wagoner said. "We're still going at this with a great sense of urgency."

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GM's request includes a credit line of $7.5 billion to be used if the downturn is more pronounced than expected. But the automaker claimed it could be profitable in two years and repay its loans by 2017.

The requests pale in comparison to what it might cost taxpayers if GM or Chrysler go bankrupt, said Aaron Bragman, auto industry analyst for the consulting firm IHS Global Insight in Troy, Mich.

"These are not small, insignificant organizations," he said. "These are the lifeblood of American manufacturing."

The company looked into three bankruptcy scenarios, all of which would cost the government more than $30 billion, GM Chief Operating Officer Fritz Henderson said. The worst scenario would cost $100 billion because GM's revenue would severely drop, he said.

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Although little is known about whether people would buy cars from a bankrupt automaker, some research "suggests that sales fall off a cliff," Henderson said.

Chrysler LLC requested $5 billion in new loans on top of the $4 billion it received in December. That's $2 billion more than expected.

Both requests were part of restructuring plans the two automakers owed the government in exchange for earlier loans.

Treasury Secretary Timothy Geithner, who will lead an Obama administration task force reviewing the plans, said his team would meet "later this week to analyze the companies' plans and to solicit the full range of input from across the administration."

Dearborn, Mich.-based Ford, which borrowed billions from private sources before credit markets tightened, has said it can make it through 2009 without government help.

GM and Chrysler plan to reduce the number of models they offer. GM raised the possibility its Saturn brand could be phased out and said its Swedish-based Saab unit could file bankruptcy this month.

The restructuring plans must be vetted by the Obama administration's new autos team. President Barack Obama's top spokesman told reporters aboard Air Force One on Tuesday that he wouldn't rule out bankruptcy for the Detroit automakers.

The GM job cuts include 10,000 salaried and 37,000 blue-collar positions, amounting to 19 percent of its current global work force of 244,500. Jobs outside the U.S. account for 26,000 of the reductions.

The cuts would take place by the end of this year, and more would follow: The new plan has the U.S. work force declining from about 92,000 hourly and salaried employees at year-end 2008 to 72,000 by 2012.

Wagoner said the new plan was "significantly more aggressive" than the one presented to the government on Dec. 2 because the global economy and auto sales had deteriorated swiftly.

Chrysler had 54,007 employees at the end of 2008, so Tuesday's cuts would equal about 6 percent of its work force.

Auburn Hills, Mich.-based 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.

"We have continued to see an unprecedented decline in the automotive sector," Chrysler Chief Executive Bob Nardelli said.

Chrysler will eliminate the Dodge Aspen, Durango and Chrysler PT Cruiser, company president Jim Press said. The Aspen and Durango, both large sport utility vehicles, have sold poorly while the PT Cruiser, released to much fanfare in 2000 due to its retro look, has also slumped in sales.

Detroit-based GM said it plans to sell or spin-off its Saturn brand. If those attempts are unsuccessful, GM will phase it out by 2011. GM is discussing the sale of its Hummer division and could complete the talks by March.

The automaker has also sought buyers for its Saab unit. Selling or eliminating those brands would leave GM to focus on Chevrolet, Cadillac, GMC and Buick, with Pontiac reduced to one or two models.

GM would also reduce the number of vehicle models, dropping the nameplates from 48 in 2008 to 36 by 2012, four fewer models than in the December plan. All of GM's major U.S. vehicle launches from 2009 to 2014 would be high-mileage cars and crossovers.

Details were unveiled the same day Obama signed into law a massive economic recovery plan. Signs that the recession was deepening were more immediate for investors, however, and they dumped stocks and pushed oil prices sharply lower.

The UAW said discussions were continuing regarding the union-run trust fund that will take on retiree health care expenses starting next year.

Terms of the union deal were not announced, but UAW President Ron Gettelfinger said in a statement that they "will help these companies face the extraordinarily difficult economic climate in which they operate."

People briefed on the deal said Wednesday that it limits overtime, changes work rules, cuts lump-sum cash bonuses and gets rid of cost-of-living pay raises to help reduce the companies' labor costs.

GM and Chrysler's loan terms require them to make their labor costs competitive with those at Japanese automakers' U.S. factories.

The people said the deal also limits supplemental pay that laid-off workers receive while they collect unemployment benefits, but base wages for UAW workers will remain the same.

The people spoke on condition of anonymity because union members have not been told about the terms.

GM Chief Financial Officer Ray Young said the company hopes to exchange two-thirds of its roughly $28 billion in unsecured bond debt by the end of March. Bondholders, he said, signed a letter saying that they were making progress with the company.

GM bondholders said in a statement it was "premature to comment on any specific terms" in the plan. They said they couldn't "make an accurate or conclusive assessment of the company's long-term viability without specific details of the tentative agreement" between GM and the UAW.

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."

AP Auto Writers Dan Strumpf in New York and Kimberly S. Johnson in Detroit contributed to this report. Associated Press Writer Ken Thomas reported from Washington.

Copyright 2009 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

2009-02-17 07:20:06

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2678 comments

SSMRTNUP 07:49:00 PM Feb 19 2009

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I'M FINISHED . . .

SSMRTNUP 07:47:48 PM Feb 19 2009

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The more BOGUS, PHONY MONEY that the Government pumps into Private Enterprise, . . The more THEY own of it and the LESS is owned and controlled by PRIVATE, FREE CITIZENS able to operate as Capitalists within a FREE ENTERPRISE SYSTEM. . . We can't let them take THAT away from AMERICA. . . . If they do, . . We cease to be a FREE SOCIETY. . .

SSMRTNUP 07:42:58 PM Feb 19 2009

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As Always, . . since the establishment of the REPUBLIC of AMERICA, . . The Citizens need NOW MORE THAN EVER to maintain our RIGHT TO POSSESS FIREARMS and THE AMMUNITION which makes them USEFUL and EFFECTIVE As a deterrant against CRIME against our Persons, our Businesses and homes. . . We CANNOT allow the States or Federal Government to infringe upon this most basic right and need as American Citizens. . . . as FREE INDIVIDUALS !!!

Trac1960 07:38:01 PM Feb 19 2009

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Without restructuring and new labor contracts.......there is no hope

SSMRTNUP 07:35:57 PM Feb 19 2009

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I do not, at this time, advocate FIGHTING with guns. . . What I do encourage each of you to do is to fight current legislation pending which will limit or require registration and Ownership of firearms, . . To resist by contacting your local, State and Federal Law Makers and Leaders and DEMANDING that they vote against any new legislation which further restricts the Rights and Freedoms of Law-Abiding Americans, . . i.e., . . The pending "HATE SPEECH" and laxing of Abortion laws, etc., . .etc., . . etc. . . . Also we need to resist any further NATIONALIZING of American Business, Infrastructure, . . Energy Systems, . . Education, . . Health Care, . . Interference into Religious Practices, . . and on and on and on. . . . It's easy to see what is going on if you just LOOK FOR IT. . . And FIGHT to STOP IT !!! . . . ADD IT ALL UP FOR YOURSELF !!! . . . CAN YOU SEE !!! . . . OPEN YOUR EYES AND " S E E " . . While there's still time. . . . . There's a freight train of Socialism / Communism a

SSMRTNUP 07:14:19 PM Feb 19 2009

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NATIONALIZE - - - * To give a National Character to. . . . * To invest control or ownership of in the National Government.

SSMRTNUP 07:12:56 PM Feb 19 2009

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NATIONALIZE - - - 1 : to give a national character to 2 : to invest control or ownership of in the national government

SSMRTNUP 07:07:17 PM Feb 19 2009

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WHAT DO YOU THINK THE WORD . "NATIONALIZATION" . MEANS ???

SSMRTNUP 07:04:59 PM Feb 19 2009

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Once we have been herded into our respective chutes and pens, Our means of resistance and defense (GUNS) have been summarily eliminated, the DOLLAR is only a Memory, the AMERO is the new object of our affection, There is no U.S. Constitution and there is NO U.S. of America. . . . The masks will come off and we will be FORCED to Obey and Worship our NEW KING. . . The very LEAST of our worrys is "What kind of CAR we're gonna drive". . . Who needs a car when you live in the factory which you've been ASSIGNED TO WORK IN ???Think I'm Crazy ? . . . If you don't FIGHT NOW, . . . Pretty soon you will not have the means nor the capacity to resist our total enslavement to the STATE. . . . . . Is It REAL??? ! . . . You'd BETTER BELIEVE IT IS !!! . . . . . . . .

SSMRTNUP 07:04:21 PM Feb 19 2009

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OUR failures were ALL MANIPULATED into FAILING. . . There is an AGENDA which goes far beneath the surface of America's troubles. . . While WE, THE PEOPLE occupy ourselves squabbling over what went wrong, who's to blame and how to fix it, . . The Scores and Stats of our favorite Sports teams, etc., . . The MANIPULATORS are in the Back Rooms DRIVING the entire Nation into TOTAL RUIN so as to make room for the N.A.U. and the NEW WORLD ORDER !!! . . . Once we have been herded into our respective chutes and pens, Our means of resistance and defense (GUNS) have been summarily eliminated, the DOLLAR is only a Memory, the AMERO is the new object of our affection, There is no U.S. Constitution and there is NO U.S. of America. . . . The masks will come off and we will be FORCED to Obey and Worship our NEW KING. . . The very LEAST of our worrys is "What kind of CAR we're gonna drive". . . Who needs a car when you live in the factory which you've been ASSIGNED TO WORK IN ???Think I'm Crazy ? . . .

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2678 comments