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.