Deadline Looms for GM, Chrysler To Finish Viability Plans
MADELEINE BRAND, host:
GM and Chrysler deliver their survival plans to the Treasury Department on Tuesday. That was the deal when they received more than $13 billion in government loans last December. Ford did not ask for government assistance at that time. Well, it's one thing to come up with a viability plan, and it's quite another to actually be viable. Joining us now to discuss the health of GM and Chrysler is New York Times reporter Micheline Maynard, who covers the auto industry in Detroit. And Micheline, do you have a clue, an idea, an early glimpse into what they're going to present on Tuesday?
Ms. MICHELINE MAYNARD (Senior Business Correspondent, The New York Times): Well, there's a couple of things going on here. First of all, the carmakers have been rolling out cuts and other steps ever since they got their federal checks. Just this week, General Motors said that they would be cutting 10,000 white-collar jobs around the world and about, I think, 3,400 of those jobs are in the United States. Chrysler has made a deal with Fiat, the Italian automaker, to take a 35-percent stake, but what we'll be getting on Tuesday is kind of an outline, and then they still do have to fill in the blanks.
BRAND: And there has been talk that Chrysler may not survive this process.
Ms. MAYNARD: Yes, I think if you look at the Detroit carmakers and had to make a guess, it's Chrysler that everyone is the most concerned about. And it's kind of a sharp contrast to 10 years ago, when they were the darling of the auto industry, and they were so attractive that they attracted Daimler from Germany, the owner of Mercedes Benz.
BRAND: So, could they possibly make a deal with GM and merge into one?
Ms. MAYNARD: There was talk of that last fall, and there was even talk of using federal money to make that possible, but that received a lot of resistance in Washington, a lot of resistance from the United Auto Workers Union because essentially, if those two companies merge, there will be a lot of jobs lost. You could argue that there'll be a lot of jobs lost anyway if they stay separate companies, but I think any kind of a merger will be down the road.
BRAND: Now you mentioned 10,000 job cuts, there will surely be more. Are there any estimates out there, how many autoworkers might lose their jobs?
Ms. MAYNARD: There aren't any estimates yet, but I have heard estimates that in order for these companies to truly survive and restructure, we might be looking at, say, another 25 to 50,000 jobs. And that's on top of over 100,000 jobs that were cut just since the UAW reached its last contract with the carmakers, and that took place in 2007. So, the future for workers is probably pretty bleak until the companies can get on their feet and start selling cars again.
BRAND: Well, speaking of that, GM got a $10 billion tax credit in the stimulus bill that's now being debated in Congress. Will that help it substantially?
Ms. MAYNARD: Well, it'll help. I think every little bit helps. I think what they need is essentially cash. I mean, you can get a tax credit, and that's sort of forgiven against your obligations, but what they need is money running in. And January was essentially the worst month for car sales since 1982, and things don't look much better for February until some of this economic uncertainty goes away. Nobody in the industry is expecting good news anytime soon.
BRAND: Right. And the car companies wanted a bigger tax credit for consumers to buy their cars, and they didn't get that.
Ms. MAYNARD: And I think one of the controversies over that is, who do you give it to and what do you give it for? Because you have to remember that GM, Ford and Chrysler build a substantial number of cars in Mexico and Canada. You also have carmakers like Toyota, Honda and Mercedes building cars in the United States. So, would it be American-built or built by an America-based company? And that is part of the reason why we're not seeing that.
BRAND: So, GM and Chrysler will be unveiling their plans on Tuesday. What if they don't pass muster? What if Treasury doesn't like them?
Ms. MAYNARD: First of all, the plans that they unveil on Tuesday, they will then have to go back and then finalize the terms by March 31st. There's an expectation by some people in the auto industry that they will go to the Treasury Department, say, your terms are too strict for us. Look at the economy, we can't possibly meet them. And that they'll just rewrite the terms of these loans. In fact, I would say there's a pretty wide expectation of that happening. But when the Bush administration actually gave the loans, they said that the money was meant to possibly pave the way for an orderly Chapter 11 bankruptcy filing. And so, now the question will be, can they actually restructure, or will we see one of these companies file for bankruptcy?
BRAND: Micheline Maynard, senior business correspondent for the New York Times based in Detroit. Thank you very much.
Ms. MAYNARD: My pleasure, Madeleine.