GM, Chrysler submit restructuring plans in bid for survival

February 18th, 2009 - 8:00 am ICT by IANS  

Washington, Feb 18 (DPA) US automotive giants General Motors Corp and Chrysler LLC scaled up their restructuring efforts Tuesday in a bid to hold onto emergency government loans and avoid declaring bankruptcy.
Faced with a government deadline to submit proof that they can survive the economic crisis, the two iconic US companies were due to submit by Tuesday evening their latest detailed proposals to slash labour costs, close manufacturing plants and dealerships and focus more on their core brands.

The two carmakers were also expected to ask for even more money from the federal government as they weather a year-long US recession and the worst industrywide downturn in a quarter-century.

Chrysler will outline a plan to cut some $3.8 billion in fixed costs, up from a prediction of $3.1 billion in December, according to media reports. The company has already cut more than 32,000 jobs since 2007.

GM is expected to speed up its timeline for restructuring over the next 18 months, including the possible sale of its Hummer, Saab and Saturn brands. The carmaker announced 10,000 job cuts last week and may offer buyouts and early retirement to another 22,000 workers.

GM was granted $13.4 billion and Chrysler $4 billion in emergency government loans in December by former president George W Bush. GM was to receive the final $4 billion from that loan Tuesday.

But the US and global downturn has only deteriorated further since December. GM’s car sales fell 49 percent in January compared to a year earlier and Chrysler’s dropped 55 percent. US car sales overall fell more than 35 percent on the month.

Ford Motor Co was the only one the Detroit-based “Big Three” firms that did not seek urgent government help in December.

The government funds came with strict conditions: Both companies have until March 31 to make demonstrable progress in carrying out their restructuring plans that are to be laid out in Tuesday’s reports.

If they cannot prove that they have made the changes to survive, GM and Chrysler will have to give the borrowed money back to the federal government and will not get any more loans, according to the original terms of the agreement.

A presidential task force on the automotive industry will exercise oversight of the agreement for the government, led by Treasury Secretary Timothy Geithner and the White House’s top economic advisor Larry Summers.

President Barack Obama has said the carmakers’ survival is critical to the economy, but many US politicians have argued bankruptcy may be the best option for an industry that has for decades failed to adapt to global demand for smaller, greener cars.

The two carmakers also remain locked in negotiations with creditors and labour unions, hoping to gain billions of dollars in concessions on salary, retirement and health benefits.

Tags: , , , , , , , , , , , , , , , , , , ,

Posted in World |

Subscribe