Automakers Outline Bailout Strategies
Update: As Detroit's automakers hit the deadline, GM and Chrysler have reached an agreement with UAW, the details of which are not yet public. Chrysler will be asking for $9 billion in bailout money on top of what it's already gotten, as well as laying off 3,000 workers and eliminating three as-yet-unnamed vehicle lines. Remaining factories will cut capacity by 100,000 vehicles.
Similarly, GM will try to sell off its Hummer and Saab lines, and Saturn is on the chopping block.
GM had hoped to reach a deal with the United Auto Workers Union by Tuesday’s deadline, but that did not happen, despite all night talks.
GM plans to slash 10,000 salaried workers worldwide, or 14 percent of the staff, and impose pay cuts for most remaining white-collar U.S. workers. It is offering buyouts to its 62,000 U.S. workers represented by the United Auto Workers union.
Chrysler is also offering buyouts to all its UAW workers.
GM and Chrysler are in talks with the UAW on several issues including the jobs bank program and supplemental unemployment benefits, which pay 95 percent of a worker's take-home pay.
A newly-appointed auto panel will review both plans and determine by March 31 if GM and Chrysler can be viable in the long run. Specifically, the Treasury Department is looking for details about the progress of negotiations with creditors and the UAW.
If the panel rules either company is not viable, it could recall the outstanding loans, a move that would likely force them into bankruptcy. In a statement, Chrysler chairman Robert Nardelli said he believes additional federal help is the best course for both Chrysler and the battered U.S. economy.
Today is the deadline for GM and Chrysler to hand in their strategies for managing their bailout money. The Toronto Star is calling it "D-Day", but will that stand for "Done", or "the Dog ate it"?
Both automakers are still in negotiations with the United Auto Workers (UAW) and are not actually expected to make the deadline.
GM is seeking concessions from the UAW and creditors under the terms of its US$13.4-billion bailout and faces a deadline of today to hand over a restructuring plan to U. S. officials showing how it can cut costs and pay back the loans.
Concurrently, Washington is set to hand out the second round of bailout funding to the floundering automakers: $7 billion ($7,000,000,000) in total.
GM will receive $4 billion US on top of the $9.4 billion it got earlier, while Chrysler will get $3 billion on top of its earlier $4 billion, said a report from Associated Press.
Word of the funding comes the same day the two companies are due to hand in restructuring plans to U.S. President Barack Obama's government.
Canada is watching this whole process very closely: the USA's northern neighbor is in an auto-trade deficit with America for the first time ever, and Ontario's provincial economy in particular relies on auto manufacturing plants. A deal in Detroit will mean serious "concessions" in Canada, and by "concessions" I mean "plant closures" and "layoffs".
If they reach agreement, industry watchers say, it will lead to significant concessions by thousands of Canadian workers, plant closings, heavy job losses and a ripple effect throughout the already troubled economy.
Canada's auto trade deficit – the value of vehicle and parts imports minus exports – shot up to its highest level in history last year, soaring to $13.8 billion.
That's more than double the $6.6 billion seen in 2007.
GM executives have said the company only has to show substantial progress by Tuesday, with the whole plan finalized by March 31.
Overseas, Saab is making moves to save itself pending a GM selloff:
Maud Olofsson told Swedish television that "it is clear that GM wants to sell Saab," adding that the government will act as a guarantor for any EIB loan to Saab.
U.S. auto giant GM had announced in December it planned to sell Saab, but the loss-making Swedish brand needs extra funding to secure its survival.