General Motors and Chrysler submitted restructuring plans to the federal government Tuesday in which they asked for an additional $14 billion in aid, a dramatic acknowledgment that conditions in the U.S. auto industry have worsened significantly in the past two months.
GM's survival plan also calls for cutting a total of 47,000 jobs globally and closing five more U.S. factories. That represents the largest work force reduction announced by a U.S. company in the economic downturn. Chrysler said it will cut 3,000 more jobs and stop producing three vehicle models.
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 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 $16.6 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 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.
The restructuring plans must be vetted by the Obama administration's new autos task force. In a sign that the administration views the U.S. steel industry as a case study for revamping the auto industry, one of the appointees to the task force played a key role in the reshaping of that industry earlier this decade.
President Barack Obama's top spokesman told reporters aboard Air Force One on Tuesday that he wouldn't rule out bankruptcy for the Detroit automakers.
Massive Work Force Cuts Planned
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. A total 26,000 of the cuts will come from outside the U.S. The cuts would take place by the end of this year.
The new plan has the U.S. work force declining from about 92,000 hourly and salaried employees at year-end 2008 to 72,000 by 2012.
GM Chairman and CEO Rick 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 in the time that has passed since then.
"Today's plan is significantly more aggressive because it has to be," Wagoner told reporters. "We have taken stronger actions; we needed to."
Chrysler had 54,007 employees at the end of 2008, so Tuesday's cuts would equal about 6 percent.
The automaker said the economy and the market for new cars have eroded significantly since its initial request. Chrysler now projects that companies will sell 10.1 million vehicles in the U.S. this year, the lowest level in four decades.
Chrysler will eliminate the Chrysler Aspen, Durango and Chrysler PT Cruiser, according to company President Jim Press. GM said it plans to sell or spin off its Saturn brand. If those attempts are unsuccessful, it will phase out the brand.
GM is also evaluating options for a sale of its Hummer division and 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.
Convincing Skeptical Lawmakers A Tough Task
General Motors and Chrysler submitted their proposals to the Treasury Department to prove they can be viable. They will also try to persuade officials that the billions of dollars they have already received in taxpayer loans have not been a waste.
At stake are the companies themselves. Both GM and Chrysler have been burning through cash and might be in bankruptcy court were it not for the lifeline the Bush administration extended in December.
But convincing skeptical lawmakers won't be easy. In hearings last year, many blamed car executives for some of the problems. With vehicle sales continuing to fall, auto analysts wonder if there is room for three Detroit-based companies in America's crowded car market.
Additionally, the Obama administration's plans to deal with the automakers are changing. A senior administration official said Sunday that President Obama will scrap the idea of appointing a "car czar" and instead will appoint a presidential task force to direct the restructuring of GM and Chrysler.
The GM and Chrysler plans focus on cost-cutting, and some of the companies' measures are already public. Last week, GM announced it would slash 10,000 jobs for salaried workers. Earlier, the companies pressured the United Auto Workers union to close its "jobs bank."
Laid-off autoworkers have spent years in the jobs bank, where they get almost full pay but aren't required to actually work. Some have performed community service, but others have spent time reading and doing crossword puzzles at $28 an hour. With the Detroit companies hemorrhaging cash, the program became a lightning rod for critics.
Of the two firms, Chrysler may have the tougher time convincing politicians it is sustainable. Unlike GM, Chrysler does not have a global manufacturing footprint, and its passenger car lineup — which includes the Chrysler Sebring and Dodge Avenger — is not very successful.
Chrysler will argue that a previously announced deal with Fiat, the Italian carmaker, will bring the sort of small vehicles it needs to the U.S. market and provide global distribution for the vehicles it already builds here.
But many analysts say it will take a year and perhaps much longer to produce Fiats in America.
From The Associated Press and NPR reports