WORLD> Governments Bailout
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WORLD> Governments Bailout
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White House plans more auto aid
(Agencies)
Updated: 2009-03-29 13:56 WASHINGTON -- The Obama administration was finishing work on a plan to give more financial aid to two Detroit automakers in return for tough cost-cutting measures that will ensure the companies' survival.
President Barack Obama's auto industry task force was expected to offer additional aid to General Motors Corp. and Chrysler LLC while setting firm deadlines for the companies to get concessions from their stakeholders.
With the companies running out of money heading into April, any short-term aid would help the auto manufacturers maintain their operations while they seek concessions. Administration officials declined to comment on the plan Saturday. Task force members have said bankruptcy could still be an option for GM and Chrysler if their management, workers, creditors and shareholders failed to make sacrifices. The conditions could be more stringent than the loan terms set by the outgoing Bush administration in December, officials have said. Obama was scheduled to announce his decision on Monday at the White House. General Motors CEO Rick Wagoner met with members of the task force on Friday. Chrysler CEO Robert Nardelli met with the panel earlier in the week. GM and Chrysler face a Tuesday deadline to submit completed restructuring plans, but neither company is expected to finish their work. The administration's plan would be designed to accelerate those efforts. Both companies are trying to reduce their debt by two-thirds and convince the United Auto Workers union to accept shares of stock in exchange for half of the payments into a union-run trust fund for retiree health care costs. The loan agreement also called for executive pay cuts and labor costs that are competitive with Japanese automakers with US operations. GM owes roughly $28 billion to bondholders, while Chrysler owes about $7 billion in first- and second-term debt, mainly to banks. GM owes about $20 billion to its retiree health care trust, while Chrysler owes $10.6 billion. Bondholders have been reluctant to accept the cuts, saying they're being required to sacrifice more than others, but they have been reviewing a recent offer by GM. The union has agreed to other terms of the loans, including work rule changes and reducing total hourly labor costs at US factories to a level comparable with Japanese automakers. Both companies will be providing an update of their restructuring efforts this week. GM in February said it intended to cut 47,000 jobs around the globe, or nearly 20 percent of its work force, close hundreds of dealerships and focus on four core brands -- Chevrolet, Cadillac, GMC and Buick. GM spokesman Greg Martin said the automaker would "adjust our viability plan to reflect changing market and economic conditions." Chrysler issued two scenarios in their February plan: one as a standalone company and another with an alliance with Italian automaker Fiat SpA. Fiat executives have talked to the task force about a proposal to acquire a 35 percent stake in Chrysler in exchange for small car technology, transmissions and other items that Chrysler has valued at $8-$10 billion. Chrysler said in its February report that it would cut 3,000 workers and eliminate three vehicle models, the Dodge Aspen, Dodge Durango and Chrysler PT Cruiser. Chrysler spokesman Todd Goyer said the company was "deeply engaged and committed to working tirelessly" with the administration. With GM's troubles extending around the globe, the administration said Saturday it was discussing the future of GM's Adam Opel AG unit with the German government. GM has sought a cash infusion from the German government to maintain operations at Opel, its European subsidiary. Michael Froman, Obama's deputy national security adviser for international economic affairs, said Obama and German Chancellor Angela Merkel discussed Opel in preparation for next week's economic summit of 20 major and developing nations and aides were continuing those discussions. |
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