General Motors, presenting a dire outlook for the future, said yesterday it may need £21.1 billion ($30bn) in total government financing to weather the economic downturn and would cut 47,000 jobs worldwide and shut five more US factories in a massive restructuring plan.
The car maker is already surviving on $13.4 billion in federal loans and said in a plan submitted to the US Treasury Department that it would seek an additional $16.6 billion if economic conditions worsen, but it could achieve profitability in two years and fully repay its loans by 2017.
The US car maker presented its turnaround plan to the Obama administration as it worked to win concessions from the United Auto Workers union and bondholders to dramatically resize the company. The UAW said it reached a tentative deal with GM, Chrysler and Ford Motor Company on contract changes but discussions were still under way about how the companies would fund union-run trust funds that will take over the companies' retiree health care obligations starting next year.
GM said it was making progress but had not yet achieved all the concessions from union workers, debt holders, dealers and suppliers that the Bush administration sough in the loan terms provided last December.
President Barack Obama's administration will review the plans from GM and Chrysler but could pull the loans if they don't approve the turnaround plans by 31 March. The review could be extended into April, but if the government demands the money back it would force the companies into bankruptcy.
GM predicted it could run out of money before the March deadline and said it is seeking the additional funding under a worst-case-scenario projection, as US sales have plummeted to a 26-year low and car sales have fallen in other parts of the world.
In December, GM said it might need a total of $18 billion in government financing but only got a commitment of $13.4 billion, including $4 billion that the car maker received Tuesday.
GM wants to receive an additional $2 billion in March and $2.6 billion in April. The company has a $4.5 billion revolving line of credit that must be refinanced in 2011 but now believes that private funding won't be available, so the car maker is asking the government to lend the money.
If market conditions deteriorate, GM says it may also need an additional $7.5 billion revolving line of credit to stay afloat, for a total potential request of $30 billion.
GM said it reviewed the potential costs of a bankruptcy filing, but said it was a poor option. If GM was forced into Chapter 11 reorganization proceedings, the company said the only credit available would be from the government, and the cost could reach as much as $100 billion.
GM's plan details extensive cuts. The car maker would reduce its US manpower from 92,000 salaried and hourly workers at the end of 2008 to 72,000 employees by the end of 2012. Worldwide, it envisions slashing 47,000 workers, including 37,000 hourly workers and 10,000 salaried employees.
In its 2 December plan to the Bush administration, GM said it would cut the number of plants from 47 in 2008 to 38 by 2012. But the new approach goes further, cutting an additional five plants by 2012 to a total of 33 facilities.
GM's brands would be reduced from eight to four - Chevrolet, Buick, Cadillac and GMC - as the carmaker said in December.
The company is considering a sale of the Hummer brand and a decision could be made by the end of March. The Saturn brand could be phased out by the end of 2011. The company is also considering its options for the Pontiac and Saab brands.
GM said all of its major US vehicle launches from 2009 to 2014 would be high-mileage cars and crossovers.
- More about:
- Automotive Equipment (car Industry)
- General Motors
- Loans And Lending Market
- Trade Unions