General Motors in desperate plea for $18bn to stay afloat

Big Three vow to change in return for federal bailout
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The Independent Online

The three major US car makers promised to cut costs, axe executive bonuses and invest in fuel-efficient new technologies in return for access to government loans, as the latest sales figures showed the dire state of the industry.

General Motors said last night that it would axe a third of its 98,500 employees by 2012 and close 11 of its 48 factories, but that it needed $18bn – including $4bn this month – to stay in business.

And remaining workers are also now coming under pressure to make concessions. The United Autoworkers union will meet company executives today to discuss ways of lightening the wage, pension and healthcare bills that burden the Detroit-based manufacturers. GM, Ford and Chrysler had been given a deadline of yesterday to give details of a turnaround plan, after Congress baul-ked at putting money into what some politicians fear could be a black hole.

US sales figures for November underscored why GM and Chrysler, in particular, have been brought to the brink of bankruptcy – and suggested that their financial travails are putting off even more customers. GM sold 41 per cent fewer vehicles last month, compared with November 2007, ref-lecting greater job insecurity and the reduced availability of car loans. Chry-sler reported a 47 per cent decline and Ford's sales were down 31 per cent.

The world's biggest car maker, Toyota, also posted sales figures yesterday and is hurting, too. Its US sales were down 34 per cent last month, worse even than the 27 per cent decline in its native Japan which prompted it to announce overnight that it will cut bonuses for 8,700 managers by 10 per cent this year.

The congressional loan applications posted yesterday by the Big Three US car makers involve as much political symbolism as they do genuine corporate planning. Alan Mulally, Ford's chief executive, plans to drive to Washington to present the plan at formal hearings later this week in a Ford Explorer hybrid sports utility vehicle, to help underline its investments in fuel-efficient engines and to try to counter the terrible publicity all three chief executives caused last month by flying to the capital in private jets. Both Mr Mulally and his counterpart at GM, Rick Wagoner, will work for a dollar a year after taking federal loans.

GM announced the deepest cuts in terms of jobs, factory closures and dealerships, which will be reduced by 2,000. It will also sell its Saab and Saturn brands, and try to convince bondholders to swap their debt for equity.

Chrysler, meanwhile, said it needs $7bn before the end of the month. Its finances are the industry's most opaque because it is not publicly quoted but rather owned by the private equity firm Cerberus, but it admitted it will be down to its last $2.5bn by year-end, with $8bn in invoices from suppliers due weeks later. Next year, it will seek cost-cutting alliances with foreign manufacturers. Ford asked for access to $9bn in loans as a "backstop", but said it will not need to draw on them if its sales forecasts prove correct. It predicted industry-wide car sales in the US will bottom out at 12.5 million next year, down from a likely 13.3 million this year. Last year, the figure was 16.2 million.

Mr Mulally said. "We hope that our submission today helps instil confidence in Ford's commitment to change, including our accountability and shared sacrifice during this difficult economic period." Ford is investing $14bn over the next seven years to retool US factories to make more fuel-efficient vehicles and it promised its first electric car would be on the road in 2010. It has already announced it is considering selling its stake in Volvo, its Swedish car maker.