Both G.M. and Chrysler tonight filed plans required of them by the federal government pursuant to the loans they took back in December. In terms of the financial requests being made G.M. is seeking an additional $16.6 billion in federal loans, on top of the $13.4 billion they took in December/January. Chrysler is looking for an additional $5 billion on top of the $4 billion already received. Without the additional federal loan infusions both say that bankruptcy is likely, and if the federal government were to provide debtor in possession financing for bankruptcy G.M. estimates that that cost could be in the range of $100 billion dollars. Those are some ugly numbers. The G.M. restructuring plan, while far from complete, offered some tough specifics. From the Wall Street Journal:
GM said it now plans to phase out its Hummer brand this year and Saturn in 2011 if no alternatives arise. Earlier, it said it was trying to sell Hummer and was re-evaluating the future of Saturn. The company also is scaling back Pontiac and trying to sell Saab, its Swedish brand. GM also said it will shut five more factories on top of the closures it had already planned. In addition, it plans to eliminate thousands of dealerships and slash 47,000 jobs this year around the world.
And the Big Three reached some agreement with the UAW over labor cost reductions.
In one sign of progress, GM, Chrysler and Ford Motor Co. reached tentative agreements Tuesday with the United Auto Workers union on a range of labor cost reductions. Among them are changes in work rules and cuts in so-called substitute pay, which supplements laid-off workers’ unemployment benefits, a person familiar with the matter said.
Basic wage levels of auto workers, which are seen as generally equivalent to workers at foreign-owned auto plants in the U.S., remain unchanged, this person said.
But the Big Three have not been able to close the deal on the issue of financing the VEBA’s that will pick up retiree health care costs in the future. That is a major problem that needs to be solved if there is any chance of additional federal loan money.
Additionally the G.M. bondholders have not reached agreement with the company to swap their debt for equity, and appear to be holding out for both better terms as well as forcing G.M. to further cut their labor costs. The interests of the bondholders and of labor are very divergent, and that divergence could also plunge G.M. into bankruptcy. There can be no deal on cost reductions without the assent of the bondholders to make the debt for equity swap.
The Obama Administration issued a statement essentially calling this a good start, but saying that all stakeholders must be prepared for additional sacrifice.
A spokesman for President Barack Obama, Robert Gibbs, said in a statement that the administration appreciates the effort by the auto makers. But he added that “more will be required from everyone involved — creditors, suppliers, dealers, labor and auto executives themselves — to ensure the viability of these companies.”
The Obama Administration sure has its hands full. I have posted the G.M. Restructuring Plan in full below.
This is why health care needs reform in this country, and removed from the books of corporations. It’s been a good, tax free way of attracting applicants in the past, but it’s now such a drag on the books that it’s costing jobs.
Time to move to a national, taxpayer funded system to level the field.
I’ve just finished Robert Reich’s latest, Supercapitalism. He argues that corporations should be doing one and only one thing: improving profits. It’s the only thing they can do well, and if they do not, someone else will come in to undercut them and steal business. That’s not the only reason for GMs current problem (the basic product mix problem), but it’s one of them.
The balance, everything else, should be covered by taxpayers in the ways we as voters seem fit.
He’s got a few other things that go along with this (including no longer treating corporations as citizens in legal eyes, and strict bans on corporate lobbying as a result), and other pieces that I think are incomplete, but I think he’s got a germ of an idea.
As the old joke goes; if you think health care is expensive wait until you see it when it’s free.
You are, however, right about businesses underwriting health care.
However in the country of Fred the socialists will take care of everything. Then social security “reform”. Then Medicare. Then there is interest on the debt. And as in all other socialist countries, 10% plus unemployment.
Have you looked at the breakdown of the buget, Fred, and see what is left for discretionary spending.
I will search for a pie chart. It would be a good reference for our arguments.
Here’s the pie chart web site.
I’ve seen that page before. I do like the twist they put on it. Surprised you’re referencing it.
That’s why you’re playing in the decimal point if you’re not talking about Social Security, Medicare, or Defense, as much of the political discourse for all my adult life has (unless it’s about increasing defense spending …) Interest on the debt, you can do nothing about without defaulting.
Social Security, very solvable as we’ve discussed. Medicare, something we need to work on along with all health care in this nation. We are unique in the industrialized world in not offering a nationalized plan to save costs. The alternative is to let poor, old people die of starvation and disease, just as it happened all the way up through the 30s. I guess neo-cons really don’t like old people. Has anyone contacted the AARP?
Defense needs to return to sanity. By the time we come out of this recession/depression, we may not be a superpower anymore. Spending all the money we have on defense is one of the reasons we’re in the economic shape we’re in.
I do have a question for you: as an avowed free 71 year old man, you’re not cashing your Social(ist) Security checks, are you? Can I assume you’re sending them back to the Treasury, non grata?
Ahhh, now I get it. The Manatee has been at it again …
I guess that ends this discussion.
By the wat, that social security is a combination of my money and the company that employed me. No Federal money here.
It’s OK to admit you’re a closet socialist. We all are, at heart.
Your money was paid out years ago, to those pensioners that preceded you. My money is going to pay yours. And yet somehow, I think it’s still OK.
PS. You’re not planning on using Medicare, are you?