WASHINGTON (AP) - Detroit's automakers, making a second bid for
$25 billion in funding, are presenting Congress with plans Tuesday
to restructure their ailing companies and provide assurances that
the funding will help them survive and thrive.
General Motors Corp., Ford Motor Co., and Chrysler LLC would
refinance their companies' debt, cut executive pay, seek
concessions from workers and find other ways of reviving their
U.S. automakers are struggling to stay afloat heading into 2009
under the weight of an economic meltdown, the worst auto sales in
decades and a tight credit market. General Motors, Ford and
Chrysler went through nearly $18 billion in cash reserves during
the last quarter, and GM and Chrysler have said they could collapse
Top executives from the Big Three failed last month to convince
a skeptical Congress that they were worthy of $25 billion in loans.
House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader
Harry Reid, D-Nev., ordered them to outline major changes,
including the elimination of lavish executive pay packages and
assurances that taxpayers would be reimbursed for the loans.
All three companies are filing separate plans. Congressional
hearings are planned for Thursday and Friday.
"I believe the industry will make a compelling case for bridge
loans that will allow the companies to return to firm financial
footing," said Sen. Carl Levin, D-Mich.
GM will outline efforts to negotiate swapping some of the
company's debt for equity stakes in the automaker, either shares or
warrants for them, said two people briefed on the company's plan.
With eight separate brands, GM will also discuss efforts to shed
brands but it would prefer to sell them instead of shutting down
Pontiac, Saturn or Saab, said one of the people briefed on the
plan. Killing off brands, like GM did with Oldsmobile in 2004,
would require cash the company doesn't have, the person said. The
people briefed on GM's preparations didn't want to be identified
because the plan hadn't been completed.
Some members of Congress have urged the Big Three executives to
take major pay cuts as part of the deal. Chrsyler Chief Executive
Robert Nardelli said he would work for $1 a year, and a similar
commitment is expected from GM CEO Rick Wagoner. Ford plans to
include a pay cut for Ford CEO Alan Mulally, although the size of
the cut was not immediately available.
Chrysler is expected to outline changes that would include a
swap of debt in the company for equity stakes and reductions in
some vehicle models, according to a person who was briefed on the
plan. The person spoke on condition of anonymity because the
discussions were private.
Ford, meanwhile, is not expected to immediately seek the loans.
Mulally told Congress last month that the company would only seek
funding if the U.S. market continued to deteriorate. He mortgaged
factories to arrange a $23.4 billion credit line shortly after
taking over the company in 2006 and he has said Ford can last at
least until 2010.
Cash stockpiles at GM and Chrysler are dangerously close to the
minimum amount required to run the companies, meaning they could
have trouble paying all their bills by the end of the year.
GM, according to its quarterly report filed with the Securities
and Exchange Commission, owes creditors $45 billion and it must pay
more than $7.5 billion early in 2010 to a United Auto Workers trust
fund that will take over retiree health care payments.
Ford owes more than $26 billion, with $6.3 billion due to its
UAW trust fund at the end of 2009. Chrysler, a private company,
does not have to open its books, but its CEO, Nardelli, has said it
would be difficult for the company to make it without federal aid.
All three likely are negotiating with the UAW for delays in
payments to the trusts.
The companies are expected to seek other concessions from the
United Auto Workers, including the elimination of the much-maligned
jobs bank in which laid-off workers keep receiving most of their
Alan Reuther, the UAW's legislative director, declined to say
what kinds of concessions the union might take but said "we
realize that all stakeholders need to come to the table to do
what's necessary to ensure the viability of the companies. We're
prepared to do our part."
The plans to Congress may also discuss more symbolic issues such
as the use of corporate jets. During the congressional hearings,
the executives were sharply criticized for traveling to Washington,
D.C., separately by private jets.
Ford said that Mulally will travel by car when he returns later
in the week. Chrysler and GM said their CEOs will not fly by
corporate jet, but neither company has said if the executives will
fly on commercial airlines or drive.
All three companies are expected to resist calls for bankruptcy.
The executives said last month bankruptcy cannot be an option
because no one would buy a car from an automaker that may not
survive the life of the vehicle.
Auto executives plan to discuss the plans at a hearing before
the Senate Banking Committee on Thursday and the House Financial
Services Committee on Friday.
Commerce Secretary Carlos Gutierrez said in an interview that
the plans need to address some of the key structural issues facing
the industry, such as costs, their debt structure, their dealer
network cost and their product lines.
Gutierrez said auto industry officials have told him they plan
to present "strong plans" but he had not been briefed on the
(Copyright 2008 by The Associated Press. All Rights Reserved.)