Automakers Ask For Billions In Loans, Credit; Two Say They’re Nearly Out Of Money

<b></b>Copyright 2008 Gannett Company, Inc.All Rights Reserved <span id="x_hitDiv1"> &lt;b>USA</b> <span id="x_hitDiv1"><b>TODAY</b> <br> <br> <b></b><span id="x_hitDiv2"><b>December</b> 3, 2008 Wednesday FINAL EDITION <br> <br> <b>SECTION: </b>MONEY; Pg. 1B <br> <br> <b>LENGTH: </b>1724 words <br> <br> <br> <b>HEADLINE: </b>Automakers ask for billions in loans, credit; Two say they're nearly out of money<br> <br> <b>BYLINE: </b>Sharon Silke Carty <br> <br> <p></p> DETROIT -- This is crunch time. <p></p> The Detroit 3 automakers on Tuesday unveiled their reorganization plans ordered by Congress before it would consider federal aid. Hearings begin Thursday, with a vote possible next week. <p></p> Two of the three companies said that without immediate help, they could run out of money. Conditions in the industry are so tenuous, if one goes down, it could bring the others with it. <p></p> General Motors CFO Frederick "Fritz" Henderson said Tuesday that GM needs $4billion in loans by the end of the year, another $6 billion by March. GM says government financing is its last hope. <p></p> "There is no Plan B," he told reporters. "Without support, frankly, the company can't fund its obligations." <p></p> Chrysler, too, says it's almost out of cash. It will have just $2.5 billion at the end of the year, and needs $7 billion by New Year's Eve. "Without an immediate capital bridge, Chrysler's liquidity could fall below the level necessary to sustain the company through the first quarter of 2009," the company said in its filing. <p></p> The industry has been in decline for a few years, but the speed at which it is now deteriorating is head-spinning. Sales in November for all foreign and domestic makers were off 36.7%, down to not even 750,000. For 16 years, sales hit 1 million a month until September, as the Wall Street crisis hit. <p></p> Hundreds of dealers are expected to go out of business this year; a few thousand could close in 2009. The supplier industry, which spreads from Wisconsin to Pennsylvania, and down to North Carolina across the South to Texas, is also on the brink, as U.S.- and foreign-owned makers slash production. <p></p> Still, the Detroit 3 aren't facing cookie-cutter problems. Ford Motor, which mortgaged almost all of its operations in 2006, says it doesn't need cash now -- it's asking for a $9 billion line of credit that it hopes it won't need to tap. <p></p> It's the gigantic GM ship that really is the danger to all the others. If it sinks, Ford says it will need that credit. The automakers share 80% of their supply base. Nearly 25% of Ford's top dealers also own GM and Chrysler franchises, Ford noted in its congressional filing: "That is why the collapse of one or both of our domestic competitors would also threaten Ford." <p></p> GM painted a grim picture for Congress, pleading for a total of $12 billion by the end of 2009 and another $6 billion credit line to tap if the car market doesn't improve -- $18 billion in all. <p></p> "Absent such assistance, the company will default in the near term, very likely precipitating a total collapse of the domestic industry and its extensive supply chain, with a ripple effect that will have severe, long-term consequences to the U.S. economy," GM said in its 37-page filing. <p></p> But GM is walking a fine line, on the one hand showing it is deeply troubled and in need of help, and on the other hand promising that, with help, the changes it makes will result in a financially viable company. GM's board on Tuesday issued a statement saying it believes the plan "provides a blueprint with the best chance for creating a new General Motors, one that is leaner, more globally competitive, profitable and self-sustaining." <p></p> Proving the plans will work has been a sticking point for Republicans who've opposed a bailout. Dana Perino, White House spokeswoman, says the administration needs proof that government aid will help automakers survive. "We are sticking to our guns that the companies have to prove that they are viable before the taxpayer dollars should be given to them," she said Tuesday. <p></p> GM says its plan will let it survive, even if annual industry sales fall to 10.5 million. It includes: <p></p> Trimming models and brands <p></p> GM says it will focus on four core brands: Chevrolet, Buick, GMC and Cadillac. <p></p> The company is looking to sell off Saab, a low-volume European brand that it tried to revive with little success. Pontiac, the brand it had hoped to recast with a sporty image, will become a niche nameplate with few models. The Hummer brand has been for sale, but GM has no deal. <p></p> And Saturn, the quirky brand launched in 1990 to win sales from Asian rivals, could be on its last legs. Henderson says the company will meet with its retail network to discuss options, which could include a shutdown, such as GM did to Oldsmobile a few years ago, or selling it. <p></p> "We have to do something with the Saturn brand, because frankly, it has not been successful," Henderson says. <p></p> The automaker also plans to slash its dealer network from 6,450 today to 4,700 in 2012. <p></p> Labor costs <p></p> GM is negotiating with its primary union, the United Auto Workers, to further reduce labor costs. Henderson would not lay out specifics of the talks, but indicated that the Jobs Bank, which pays workers almost all their pay when they're laid off, could be up for discussion. <p></p> The automaker might have trouble persuading the UAW to loosen its grip on that provision. In a Q&A posted on its website Tuesday, the UAW defended the Jobs Bank, saying policies are similar to ones employed at Toyota and Honda, which also pay some workers when they're laid off. <p></p> "With 4,500 workers earning their full paychecks while its San Antonio truck plant was idle this summer, Toyota had more workers in its version of the 'Jobs Bank' at a single plant than Chrysler, Ford and GM currently have in all of their factories put together," the posting says. <p></p> The UAW scheduled an emergency meeting with local plant leaders and top officials to discuss what the union should do to help automakers. <p></p> Oversight committee <p></p> GM says it plans to pay back its loans as quickly as possible -- by 2012, if the market starts to improve by 2010. The company is agreeing to a government oversight board that would ensure GM was spending the money the way it says it will, and that its restructuring plan is on track. <p></p> Plant closures <p></p> The company will close more plants, going from 64 assembly, powertrain and stamping plants in 2004 to 38 by the end of 2012. <p></p> Haggling down its credit <p></p> Rather than filing for Chapter 11 bankruptcy protection, where the automaker could get a court's help to renegotiate its debt, GM is trying to do that on its own. The automaker has $65 billion in outstanding debt, and it would like to pare that to $35 billion. It may have to use the weight of the government oversight committee to lean on lenders to make that happen. <p></p> "The plan is intended to achieve what would otherwise be achieved through bankruptcy," Henderson says, while avoiding the stigma of bankruptcy court. GM is afraid buyers would avoid it if it filed for Chapter 11 protection. <p></p> Reducing executive pay <p></p> GM CEO Rick Wagoner will earn just $1 in 2009 and is forgoing bonuses for 2008 and 2009. Several top executives will see their base salaries cut 20% to 30% in 2009. <p></p> GM pointed out in its congressional filing that Wagoner and Henderson have not earned as much as people think. Their compensation is tied to stock performance, the automaker said, so many of their stock options became worthless as the share price has fallen. SEC filings show Wagoner potentially earning $14.4 million in 2007 -- in fact, he took home $1.8 million. <p></p> GM also is selling its corporate aircraft. Executives flying to Washington on private jets to ask for a taxpayer bailout irked many senators and representatives in the first round of hearings. <p></p> "Selling the corporate jets, and CEO pay, those are symbolic gestures," says Stephen Spivey, senior auto analyst at consulting firm Frost & Sullivan. "In the overall scheme of getting GM back on track, what they're doing in regard to paring down the number of brands and getting some concessions from creditors, that's what's really going to make a difference." <p></p> TEXT WITHIN GRAPHIC BEGINS HERE <p></p> How much automakers want from government <p></p> Chrysler <p></p> $7 billion loan by the end of 2008 <p></p> Ford <p></p> $9 billion credit line <p></p> GM <p></p> $6 billion credit line <p></p> $2 billion loan by the end of 2009 <p></p> $6 billion loan in the 1st quarter of 2009 <p></p> $4 billion loan by the end of 2008 At a glance <p></p> What automakers say they'll do <p></p> Detroit auto CEOs promise to work for $1 a year in return for federal money, negotiate better deals with the United Auto Workers union and sell their corporate aircraft — all addressing hot-button issues that raised congressional ire when the Detroit 3 asked for help two weeks ago. <p></p> Here are other moves the Detroit companies are telling Congress they'll make to stay in business so they'll be able to pay back federal loans they're seeking: <p></p> GM <p></p> •Shrink. Sell Saab, trim Pontiac, sell or close Saturn, sell fewer models. Reduce powertrain and stamping facilities to 38 by end of 2012, from 64 now. <p></p> •Cut executive pay. In addition to CEO Rick Wagoner's $1 salary in 2009 and the elimination of his bonuses for 2008, other executives' pay will be cut 20% to 30% and bonuses eliminated. <p></p> •Reduce debt. Negotiate with creditors to cut outstanding debt to $35 billion from $65 billion now. <p></p> •Suspend dividends. Resume only after the government loans are repaid. <p></p> •Play fair. Work under a federal oversight committee that ensures GM uses the money as intended and that GM repays the government. <p></p> Ford <p></p> •Shrink. Sell Volvo. Eliminate 606 dealers by year's end, leaving 3,790. Reduce major parts suppliers to 750 eventually from 1,600 currently. Close two plants this quarter, as previously announced, and four more from 2009 through 2011. <p></p> •Cut white-collar pay. As previously announced, cancel all bonuses to be paid in 2009 for management employees worldwide; forgo bonuses for all North American employees; give no merit pay increases next year to North American salaried workers. <p></p> •Accelerate alternatives. Get more hybrids and electric vehicles on the market sooner. The plan includes a battery-power van for commercial fleets in 2010 and a battery-power small sedan in showrooms in 2011. In addition, bring to market by 2012 a family of hybrids, plug-in hybrids and electric vehicles. <p></p> Chrysler <p></p> •Seek allies. Find partners to share development costs, buy products. Chrysler already sells vans to Volkswagen, is to build pickups for Nissan and uses a jointly developed two-mode gasoline-electric hybrid system in full-size trucks. <p></p> •Cut white-collar, executive pay. No increases, bonuses this year, none planned next year. CEO gets no health care or other benefits, top management pays 100% of medical <span id="x_hitDiv3"><b>insurance</b> premiums. <p></p> •Accelerate alternatives. Introduce an electric vehicle in 2010; crank out 500,000 electric vehicles by 2013. <br> <br> <b>GRAPHIC: </b>PHOTO, Color, Photo by Tim Loerhke, USA TODAYGRAPHIC, Color, illustration by Jim Sergent, USA TODAYGRAPHIC, B/W, Alejandro Gonzalez (line graph) <br> <br> <b>LOAD-DATE: </b>December 4, 2008 <br> <br> <div> <div class="x_nshr"> <center></center> <center><a href="http://www.lexis-nexis.com/lncc/about/copyrt.html" target="_new" class="x_pagelinks">Copyright © 2008 LexisNexis, a division of Reed Elsevier Inc. All rights reserved. </a><br> <a href="http://www.lexis-nexis.com/terms/general" target="_new" class="x_pagelinks">Terms and Conditions</a> <a href="http://www.lexis-nexis.com/terms/privacy" target="_new" class="x_pagelinks"> Privacy Policy</a> <br> </center> </div> </div> </span></span></span></span>