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GM asks US for extra US$16.6b in new loans

By Jeff Green | February 19, 2009, Thursday | Print Edition

GENERAL Motors Corp asked the United States government for as much as US$16.6 billion in new loans, more than doubling the aid to date, and said it needs some of the cash next month to survive as it sheds brands and cuts 47,000 more jobs worldwide.

Chrysler LLC, propped up like GM with federal assistance, said it's "seeking" US$5 billion more from the government and will shed 3,000 more positions.

The auto makers' fate is now in the hands of the Obama administration, which must decide whether to give them the additional money or let them go bankrupt. Robert Gibbs, President Barack Obama's chief spokesman, on Tuesday didn't rule out forcing the companies to restructure through bankruptcy.

"Most of the low-hanging fruit when it comes to cost cutting is gone," said Rebecca Lindland, an IHS Global Insight Inc analyst in Lexington, Massachusetts. "You get to the point where you're throwing good money after bad."

GM and Chrysler met a deadline on Tuesday to report progress in revamping operations with US$17.4 billion in loans granted so far and got a boost from tentative accords with the United Auto Workers to cut labor costs. Now, they must show the government by March 31 that they can return to profit in order to keep the money.

"We will tighten things down and hang on as long as we can" as the new request is considered, GM Chief Executive Officer Rick Wagoner said yesterday in a Bloomberg Television interview. GM said it will run out of cash without a payment of US$2 billion next month.

US Treasury Secretary Timothy Geithner said he will start reviewing the companies' plans later this week when he and Lawrence Summers, director of the White House National Economic Council, convene an autos task force.

"I wouldn't preclude policy choices, particularly since we haven't seen the details" of the plans, Gibbs told reporters on Tuesday before the GM and Chrysler filings. The auto makers said in those plans that bankruptcy might cost the US as much as US$110 billion.

GM said at least US$9.1 billion more in loans is needed to finish restructuring, and that sum could rise to US$16.6 billion should the economy worsen. Detroit-based GM has received US$13.4 billion since December.

The global job reductions would be about 19 percent of GM's workforce, based on the total of 244,500. The retrenchment includes closing five more US plants by 2012; deciding whether to sell or shut the Hummer unit by the end of next month; and chopping salaries by as much as an additional 30 percent for the four-most senior officers after Wagoner, who is working for US$1 a year.

GM in December said it will trim its product lineup to four brands: Chevrolet, GMC, Buick and Cadillac. Pontiac would survive only as a niche model.

Production of Saturn cars would stop in 2011, if the brand hasn't been sold, GM said. Should dealers or other investors present a proposal, GM "would be open" to a spin-off or a sale, according to GM. The Saab automobile unit may have to be restructured under Swedish bankruptcy laws without government support there.


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