The Buffalo News, February 18, 2009, Wednesday

The Buffalo News

February 18, 2009, Wednesday

The Buffalo News


GM, Chrysler ask $14 billion in additional federal aid

By Tom Krisher and Ken Thomas
ASSOCIATED PRESS

DETROIT — General Motors and Chrysler asked the government for an additional $14 billion in aid Tuesday, a dramatic acknowledgment that conditions in the U. S. auto industry have grown significantly worse in just two months.

GM presented the government a survival plan that also calls for cutting 47,000 jobs globally by the end of this year and closing five more U. S. factories by 2012 — the largest work force reduction announced by a U. S. company during the economic downturn.

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

Meanwhile, the United Auto Workers union said it has reached a tentative agreement with Chrysler, GM and Ford Motor Co. on modifications to labor contracts. Such concessions were also a condition of the government bailout.

GM did not identify which manufacturing plants it intends to close over the next several years. “We’re not naming plants at this point in time,” said Rick Wagoner, GM’s chairman and chief executive officer.

But it now says its total number of U. S. assembly, powertrain and stamping plants will decline to 33 by 2012, instead of 38 as it had projected last December. It had 47 plants in 2008.

GM operates an engine plant in the Town of Tonawanda with 1,340 hourly and salaried workers.

Art Wheaton, director of labor studies at Cornell University’s School of Industrial and Labor Relations in Buffalo, said it is too early to know whether GM’s projected plant closings could affect the Tonawanda site on River Road.

He said the company probably wouldn’t make those types of decisions until it completes its negotiations with the UAW.

Still to be determined is how the Tonawanda plant will be affected by GM’s previously disclosed plans to reduce its U. S. salaried work force by 3,400 jobs. The site has 201 salaried jobs.

GM verified that it is considering taking back some of Delphi Corp.’s operations. While it did not specify which sites would be included, it has been speculated that Delphi’s plant in the Town of Lockport could be one of them. Delphi was spun off from GM a decade ago.

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 previously allocated and $9.1 billion in new loans. The world’s largest automaker said it could run out of money by March without new funds.

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

Chrysler LLC requested $5 billion in new loans on top of the $4 billion it received in December. The company had said it might need an extra $3 billion.

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

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 to car buyers.

GM said it plans to sell or spin off its Saturn brand. If those attempts are unsuccessful, GM will phase out the brand.

GM is also evaluating options for a sale of its Hummer division and has 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.

Chrysler will eliminate the Dodge Aspen, Durango and Chrysler PT Cruiser, according to company president Jim Press.

The restructuring plans must be vetted by the Obama administration’s new autos task force. In a sign the administration views the U. S. steel industry as a case study for revamping the auto industry, one of the task force’s appointees played a key role in the reshaping of that industry earlier this decade.

President Obama’s top spokesman told reporters aboard Air Force One on Tuesday that he wouldn’t rule out bankruptcy for the Detroit automakers.

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.

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. About 26,000 of the cuts will come from outside the United States. The cuts would take place by the end of this year.

The new plan has GM’s U. S. work force declining from about 92,000 hourly and salaried employees at the end of 2008 to 72,000 by 2012.

GM’s Wagoner said the plan submitted Tuesday is more aggressive than the one presented to the government on Dec. 2 because the global economy and auto sales have deteriorated since then.

Chrysler had 54,007 employees at the end of 2008, so Tuesday’s 3,000 cuts would equal about 6 percent.

Chrysler said the economy and the market for new cars have deteriorated significantly since its initial request. Chrysler said it now projects that automakers will sell 10.1 million vehicles in the United States this year, the lowest level in four decades.

The UAW said discussions are continuing with the automakers 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.

News Business Reporter Matt Glynn contributed to this story.