Daily Auto News General Motors Asks for $30 Billion in Support
Daily Auto News
General Motors could need as much as $30 billion in new federal loans in order to hold off bankruptcy, the automaker told the White House yesterday. GM provided the White House with an update yesterday on its progress toward restructuring, required under the terms of a loan the company accepted from the federal government in December. The Obama administration has until the end of March to decide whether to demand immediate repayment of loans already given to the company, effectively forcing America’s largest automaker to declare bankruptcy before its financial situation can worsen further.
In the report, “GM said it was making progress on complex deals to reduce some $48 billion in debt owed to bondholders and the United Auto Workers union but had fallen short of an initial requirement to complete those agreements by Tuesday’s deadline,” according to the AP. The company asked the White House for “an additional $16.6 billion from the U.S. Treasury — for a total of up to $30 billion in loans — and said it would run out of cash as soon as March without new federal funding.”
The company “claimed it could be profitable in two years,” the AP notes. GM proposes to begin making payments on government loans in 2012, “and repay its loans by 2017.”
GM has also asked for “$6 billion in financial support from five governments in addition to the U.S. federal aid outlined in its restructuring plan late Tuesday,” CNN Money reports. “The U.S. automaker said it is in talks with authorities in Germany, the U.K., Sweden, Canada and Thailand to secure the aid by March 31.”
Analysts were somewhat surprised that GM did not propose a plan to declare bankruptcy immediately. Media reports running up to the deadline yesterday had predicted that GM would propose a carefully controlled bankruptcy under which the government would provide funding to help restructure the company while bankruptcy courts forced a shutdown of underperforming brands, allowing a leaner GM to emerge.
However, the company may have backed off of proposing bankruptcy at the request of the White House. Rep. Sander Levin (D-Mich) told Bloomberg that the company had “been asked to address the issue of bankruptcy in their plan but not to have that as an alternative plan.” Levin told Bloomberg that “he learned of the administration’s request from a ‘very, very good source’ but declined to elaborate.” It’s unclear whether White House officials agree with Sanders’ assessment: “Attempts to obtain comment from the White House Monday were unsuccessful, and a GM spokesman declined to comment.”
The plan included a summary of cost-cutting measures already undertaken by General Motors officials, as well as plans for future cuts. The AP reports that proposed job cuts “include 10,000 salaried and 37,000 blue-collar positions, amounting to 19 percent of its current global work force of 244,500.” The company “said it plans to sell or spin-off its Saturn brand. If those attempts are unsuccessful, GM will phase it out by 2011. GM is discussing the sale of its Hummer division and could complete the talks by March. The automaker has also sought buyers for its Saab unit. Selling or eliminating those brands would leave GM to focus on Chevrolet, Cadillac, GMC and Buick, with Pontiac reduced to one or two models.” GM plans to introduce just five new models over the next year, rather than the 12 new models previously planned.
The company reportedly has “reached a tentative deal with the United Auto Workers union to reduce labor costs,” according to Newsday. Details are not yet available.
While the automakers await the White House’s decision on further aid, they’re trying to spur a recovery at the dealership with heavy incentives on almost every new car model. Research the best car deals with U.S. News’ car rankings and reviews.
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