Top three US car makers seek $34 bn bailout

December 3rd, 2008 - 1:58 pm ICT by IANS  

New York, Dec 3 (IANS) Facing imminent bankruptcy, the top three American automobile majors - General Motors, Chrysler and Ford - have sought a $34 billion bailout package from the US Congress. In return, they have promised to be more efficient, cut thousands of jobs, trim down brands and reduce salaries of their CEOs to $1 a year.The three auto makers presented their turnaround plan to the Congress saying their collapse is imminent unless they are bailed out from the present financial crisis.

Also called Detroit’s Big Three, because of the city they are based in, the three auto makers submitted their turnaround plans to the Congress. Following a Congressional hearing last month, the Congress had asked for a turnaround plan from these companies if they wanted any federal financial aid.

The plan was submitted Tuesday by all the three companies, news reports said.

General Motors has sought an immediate injection of $4 billion to stay afloat till the end of the year, reported The Wall Street Journal, and $18 billion in total. General Motors has lost more than $20 billion this year.

Chrysler has requested $7 billion by the end of this month, in addition to $6 billion from a Department of Energy programme to produce fuel-efficient vehicles.

Ford Motors has sought a $9 billion line of credit, which it said it might not need, in addition to $5 billion from Energy Department programme to produce fuel-efficient vehicles.

The money from the Energy Department programme is not considered to be part of the bailout figure as there is budget provision for this.

“The first $4 billion is crucial,” General Motor’s president, Frederick Henderson, said. “We wouldn’t have asked for it if we didn’t need it.”

In turn, the three auto companies promised to become more efficient, cut down jobs and trim down their brands. For instance, General Motors said it would focus on four core brands - Chevrolet, Cadillac, Buick and GMC. It would sell, eliminate or consolidate other brands like Saturn, Sab, Hummer and Pontiac, GM said.

Sale of cars in the US has plunged to a 26 year low, as the American economy is now going through a recession.

The three auto makers have also promised to cut salaries of their top executives and sell off their corporate jets.

The salaries of the CEOs of Ford and GM would be cut to $1 a year, while the Chrysler CEO is already being paid $1 a year, according to the plan. The salary and compensation of these CEOs normally run into several million dollars.

House of Representatives Speaker Nancy Pelosi told reporters that she had discussed a bailout package for the auto makers with the US President George W. Bush on Monday, without revealing further.

However, Pelosi did say: “Bankruptcy is not an option.”

In its first reaction, White House too said it would look into the plan first, before taking a call on it. “We’ll want to take a look at their plans in detail and see if they meet a credible test for viability,” White House spokesperson, Tony Fratto, said.

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