GM, Chrysler In Talks Over Restructuring
MELISSA BLOCK, host:
This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.
MICHELE NORRIS, host:
And I'm Michele Norris.
It's a little after 5:00PM on the east coast and that means a deadline just passed for GM and Chrysler. The two automakers had until 5:00 this afternoon to submit their plans on how they might return to profitability. Chrysler has a statement out on its plan. We're still waiting on GM. Both companies have received billions of dollars of loans from the government. And both will need to borrow more money.
The Treasury Department is insisting that the companies prove that they're viable so that they can pay the money back. Joining us now is NPR's, Frank Langfitt. Frank, what does this Chrysler plan call for?
FRANK LANGFITT: Well, what we've seen so far, Michele, is they had been asking for about $7 billion, up until now. Now Chrysler says it needs another $2 billion more in taxpayers' loans. And that's because the auto market has really fallen off since December, when they last made their plea for, really, survival.
They're going to cut another 3,000 jobs. That's in addition to about 32,000 they cut last year. They're also going to cut three vehicle models. They won't say, but one place we might want to look for is some of the passenger cars that have really had a lot of sales problems for a long time. You know, they sell a lot of them to the rental fleets. So, that's what we know so far.
NORRIS: Now, Chrysler is painting a scenario that they would be able to survive on their own. Do people who follow the auto industry closely, including yourself, buy that?
LANGFITT: Well, certainly not the analysts I've talked. I've talked to a lot of people. And what they say is Chrysler is simply too small to compete. You know, this goes back to some of the Econ 101 classes we took about economies of scale. If you take a company like GM, it's a global company, it can spread costs all over the world. Chrysler is much smaller. It's just in North America.
It also can't distribute its vehicles around the world. So, the idea of trying to be able to do this all on their own will be quite difficult. One of the things that they're also talking about, which we've reported before is a deal with the Italian carmaker Fiat. And that would bring small cars to America, give distribution overseas to Chrysler. But that really wouldn't kick in for a couple of years, probably, before we saw that happening.
NORRIS: Now, we're just getting news that GM has actually released the embargo on the information about their report for restructuring and viability. What do we know about that report?
LANGFITT: Well, it's a much bigger company, and they're asking for a lot more. Back in December, they said they needed $18 billion, now, they say they're going to need actually 30 billion - for the same reasons Chrysler just said and that is vehicle sales had fallen off. And it's going to be really difficult for them to reach profitability, because they're just not going to have that much revenue.
They're also talking about cutting 20,000 workers here in North America by the end of 2012. They're going to slash five more plants, apparently, since they even talked about in December. I think Hummer and Saturn, you know, they couldn't sell Hummer. They could close that down in, you know, I don't know, six or seven weeks.
Saturn, they said they're trying to work out a deal with their franchise owners. They're the people who sell those vehicles. But if they can't, they would actually let Saturn just kind of run its course and go out of business in 2011.
NORRIS: Now, Frank both these companies have been involved in very careful negotiations trying to win big concessions from their suppliers, from their creditors, from the union. What does Chrysler first say about what's happening with the biggest sticking points for its union?
LANGFITT: Here's what Chrysler says - it says, quote, "It has implemented or fundamentally agreed on reworking these dead obligations and a huge amount of money for retiree healthcare." But it doesn't go into any details. And I think you're really going to have to look very closely to see what kind of deal they've cut, because they have huge obligations.
In the case of General Motors, they're still working on it. And, as I said before, GM is so much bigger than Chrysler, their problem is a lot bigger. They ultimately owe something, like, $20 billion in retiree healthcare. And as we know, they just don't have that money. So, what they're probably going to be talking about to the union about is the union taking some sort of stake in GM actually being an owner of part of GM in exchange for not having all of that money upfront coming into a retiree healthcare fund.
NORRIS: Thank you, Frank.
LANGFITT: Happy to do it, Michele.
NORRIS: That was NPR's Frank Langfitt.