GM, Chrysler Request another $22B bailout

[DKW 86 8,212]

http://www.foxnews.com/politics/first100da...n-bailout-cash/

Only the tip of the iceberg...We should never have gotten into the bailout business for companies with failed business models. We are just wasting even more cash.

GM, Chrysler Request $22B

Automakers say they need more emergency government

GM and Chrysler Request Billions More in Loans

General Motors Corp. is expected shortly to release the details of its own restructuring plan.

General Motors Corp. and Chrysler LLC on Tuesday told the U.S. government it needs even more taxpayer money to survive than originally thought.

Meanwhile, the United Auto Workers union said it has reached a tentative agreement with Chrysler, GM and Ford Motor Co. on modifications to existing labor contracts. The agreement was announced by UAW President Ron Gettelfinger as Chrysler unveiled new job cuts as part of its restructuring.

Acknowledging that industry conditions are worse than expected when it made the case in December for a government bailout, Chrysler requested an additional $5 billion in government loans. It originally said it would need $3 billion more. The company had previously received $4 billion from the Treasury Department.

General Motors Corp.'s restructuring proposal says the company may need up to $30 billion in government loans as it implements a survival plan that includes cutting 47,000 jobs and closing five more U.S. factories.

GM submitted the dire plan to the Treasury Department on Tuesday to explain how the Detroit automaker will become viable and repay its loans. It says GM will try to borrow up to $16.6 billion more from the government, on top of the $13.4 billion it has already received.

With the restructuring, GM expects to start repaying the government in 2012 and fully pay off the loans by 2017.

GM says it has considered the option of bankruptcy, but the only credit available to finance a reorganization would be from the government, and it could cost as much as $100 billion.

The UAW said discussions are continuing regarding the union-run trust fund that will take on retiree health care expenses starting next year. Under terms of the government loans, both Chrysler and GM are required to reach concessions with the UAW and debt holders.

To prove they can survive as viable companies, both Chrysler and GM need to sharply reduce costs. To that end, Chrysler said it will cut 3,000 more jobs and stop producing three vehicle models.

Chrysler said it now projects that automakers will sell 10.1 million vehicles in the U.S. this year, the lowest level in four decades.

Chrysler Vice Chairman and President Jim Press said in a conference call with reporters that the company will eliminate the Dodge Aspen, Durango and Chrysler PT Cruiser.

GM has previously outlined reductions to both its hourly and salaried work force and has said it plans to cut back to four vehicle brands from eight.

The plans still have to be vetted by Treasury and the new autos task force announced by the Obama administration Sunday night.

The news came on a day when President Obama signed into law a massive economic recovery plan. Signs that the recession is deepening were more immediate for investors, however, and they dumped stocks and pushed oil prices sharply lower.

[Tigermike 4,246]

What's another $22 BILLION for friends.

[AU alum 2]

Must be nice to know you don't have to be successful at what you do. The government is there to take care of you!

[autigeremt 7,543]

Don't expect Ford to ask for any money at this time. It appears that FoMoCo may be able to withstand the onslaught.

And just in time.....the 2010 Ford Fusion Hybrid. Not only has it been deemed a better product than either the Camry or the Accord, but it whips their ass in fuel economy. Ford is also looking at building an F-150 that will get 26-28 MPG. Impressive for a washed up U.S. Automaker.

GM should have followed Fords lead. Now they are held up by the government hand.

[Bottomfeeder 244]

Don't expect Ford to ask for any money at this time. It appears that FoMoCo may be able to withstand the onslaught.

And just in time.....the 2010 Ford Fusion Hybrid. Not only has it been deemed a better product than either the Camry or the Accord, but it whips their ass in fuel economy. Ford is also looking at building an F-150 that will get 26-28 MPG. Impressive for a washed up U.S. Automaker.

GM should have followed Fords lead. Now they are held up by the government hand.

Only if it's paid for and it will be a Ford. I will not finance a vehicle.

[BamaGrad03 0]

Does anyone else here think like I do...that it didn't matter what the GM & Chrysler "plans" were for recovery? I feel like regardless of what they said on the hill yesterday, they were already headed towards getting their money.

I feel like the only people our Government has said no to lately, are the taxpayers.

[DKW 86 8,212]

Does anyone else here think like I do...that it didn't matter what the GM & Chrysler "plans" were for recovery? I feel like regardless of what they said on the hill yesterday, they were already headed towards getting their money.

I feel like the only people our Government has said no to lately, are the taxpayers.

The fix was in long ago. They havent done anything yet but make the same promises they have made for 35 years. The real changes arent scheduled for two years to the labor contracts. That is what is killing them off now. SSDD...and so it goes.

[Tigermike 4,246]

To be perfectly blunt and honest about it, this really pisses me off.

GM said it might need as much as $100 billion in financing from the government if it were to go through the traditional bankruptcy process. Rick Wagoner, GM's chairman and chief executive, said the bankruptcy scenarios are "risky" and "costly" and would only be pursued as a last resort. (Really? Well guess what - it’s even more “risky” and “costly” for the taxpayer to give GM another 100 billion bucks (and further on in the article it is acknowledged that a pre-packaged bankruptcy would cost about 30 billion).

So far, GM has received $13.4 billion in U.S. loans; its plan said the company needs a total of $30 billion in aid, or $16.6 billion more than it has now. GM also said it needs at least $7.7 billion in loans from the Department of Energy to develop fuel-efficient technology.

But the union and the auto makers remained at odds over the largest sticking point: new terms for how the car companies will put billions of dollars into trust funds to cover the cost of health care for retired union workers. The auto makers want to pay a portion of their cash obligation to the funds with stock instead. The funds are known as VEBAs, or voluntary employee beneficiary associations.

On Sunday, GM received a letter from its bondholder committee outlining its framework for restructuring $29 billion in company debt by swapping debt for stock. "This framework is consistent with the government's objective in the U.S. Department of the Treasury's term loan of substantially de-leveraging GM but also provides that bondholders must receive fair and equitable treatment vis-a-vis other GM stakeholders," the letter said.

Tuesday's announcement signals GM's management has softened it view on a possible bankruptcy filing. In the past Mr. Wagoner has insisted bankruptcy was not an option for the company. But in the recovery plan the company described two alternative scenarios in addition to a traditional filing.

The plan says a "pre-packaged" bankruptcy, in which new terms with unions, suppliers and creditors are hammered out in advance, might require only $30 billion in debtor-in-possession financing. In another scenario known as a "cram-down" bankruptcy, GM could try to restructure its debt over the objections of creditors.

http://online.wsj.com/article/SB123489494750801713.html

GM claims its going to pare down its working force and model line. But what isn’t clear is how it plans on eliminating the legacy costs which still make it uncompetitive. Does anyone know what would require them to confront that issue? That’s right - bankruptcy.

[autigeremt 7,543]

We need to stop the madness. Unfortunately, they (government) won't listen to us.

[BamaGrad03 0]

Basically, the UAW is willing to screw over WORKING people and have 47,000 GM workers be let go in GMs new plan. All for the sake of the retirees to not have to concede on ANY of their benefits.

It's sad. It's sorry. They made the raw deal with the UAW that gives retirees 3k/month and amazingly good healthcare. Now that they can't afford it, they should be REQUIRED to restructure that whole deal before asking for my tax dollars.

The average worker gets 76/hr compared to Nissan/Toyota/etc workers who make 46/hr. AND they get lifetime benefits?

Without MASSIVE restructuring of that plan, we are just throwing good money after bad. The UAW is more than willing to dig in their heels with their hand out. But they don't want the taxpayers to have any say in how they spend our money.

[autigeremt 7,543]

Of course not. THEY ARE A SPECIAL INTEREST GROUP! Nothing more.

[DKW 86 8,212]

http://www.usnews.com/blogs/flowchart/2009...d-chrysler.html

Very telling article on GM and Chrysler.

9 Bailout Surprises From GM and Chrysler

February 18, 2009 12:52 PM ET | Rick Newman | Permanent Link | Print

Back in December, economist Mark Zandi of Moody’s Economy.com told Congress that bailing out the Detroit automakers could ultimately cost $75 billion to $125 billion. So when GM and Chrysler asked for a mere $17.4 billion late last year, it seemed like a bargain.

Then GM got another billion or so as part of a bailout for its car-financing arm, GMAC. And now, GM and Chrysler have asked for almost $30 billion more from a variety of programs, pushing the total for just these two companies close to $50 billion. That doesn’t include Ford, which many analysts think will end up asking for nearly as much federal aid as GM.

[see why Ford is veering closer to a bailout.]

Surprised? Get used to it: Deepening gloom has become a recurring theme of Bailout Mania, as troubled firms dribble out their bad news in droplets and everything turns out worse than expected. Here are some of the major surprises contained in the “viability plans” submitted to the government by GM and Chrysler:

Both need way more money than previously acknowledged. In its 117-page viability plan, GM says it expects to burn an astounding $18 billion in cash in 2009, one reason it may need a total of $30 billion from the government by 2011. Chrysler says it will have to declare bankruptcy by March 31 if it doesn’t get an extra $11 billion in government aid, for a total of more than $15 billion. At this point, it seems prudent to assume that they’ll need billions more after that.

[see 15 companies, including Chrysler, that might not survive 2009.]

GM’s best-case scenario looks a lot like bankruptcy. Even if GM doesn’t declare bankruptcy, its shareholders will nearly be wiped out: The automaker would grant many of its bondholders equity in exchange for debt, and the government would expand its ownership. Those moves would severely dilute the value of GM shares. Standard & Poor’s forecasts that the value of GM’s shares will fall to 50 cents within 12 months – it’s lowest possible price target.

GM is seeking other bailouts. GM’s biggest problem is that its North American operations have been losing money for years. But it turns out GM’s global operations are doing worse than expected, too. GM is now forecasting a gigantic $14.2 billion pretax loss for 2009, which Credit Suisse analyst Chris Ceraso says “is more than twice our current forecast of a $7.0 billion loss in 2009.” The shortfall mostly comes from worse-than-expected results in Europe, Asia, and other regions, one reason GM is also seeking up to $6 billion in aid from the governments of Germany, the United Kingdom, Sweden, Canada, Thailand and possibly other countries.

[see why falling behind Toyota is good for GM.]

GM is slashing its portfolio of 8 brands. Critics have been urging GM to do this for years, and GM finally seems to be listening. The Hummer division has been on the block since last year, and GM now says that by April it may decide to phase out the brand altogether if no buyer surfaces. Saab is now officially for sale, too, and GM will shut down Saturn by 2011 unless somebody materializes to buy it. Pontiac will become a “highly focused niche brand.” That leaves Chevrolet, Buick, Cadillac and GMC as GM’s core brands.

[see the 12 most important cars of 2009.]

GM’s pension is in trouble. A healthy pension used to be one of the few bright spots for GM: In 2007, its pension was overfunded by $20 billion. But the plunge in the financial markets has decimated the pension fund, now estimated to be facing a $13 billion shortfall. If the pension doesn’t recover, that could necessitate yet another federal bailout down the road.

Five years of pain. If GM gets all the help it’s asking for, it expects to break even by 2011. That’s under a fairly pessimistic assumption that annual car sales will amount to 12 million, 30 percent below peak sales of about 17 million in 2006. GM doesn’t expect to have “free cash flow,” another important sign of health, until 2014.

Chrysler admits its prospects are weak. In its own 177-page viability plan, Chrysler says it can stand on its own for awhile – as long as it gets another $11 billion in government aid, on top of the $4 billion it’s already received. But “to be viable on a longer term basis,” the company says, “we believe it is critical that Chrysler continues to pursue strategic partnerships/consolidation.” In other words, Chrysler’s days as an independent automaker are numbered, unless the Obama administration wants to make it a permanent government agency.

[see 4 myths from this year’s Detroit auto show, including phony claims about electric cars.]

The Fiat deal is a fig leaf. A few weeks ago, Chrysler announced plans to partner with the Italian automaker Fiat, as a way to get quick access to small-car technology and expand its global reach. But that deal “is contingent upon Chrysler restructuring its debt, obtaining concessions, and receiving adequate government funding.” In other words, the U.S. government needs to finance a deal in which an Italian company puts up no cash and gets access to U.S. markets, so it can compete with … other companies that American taxpayers have just bailed out. That’s a mighty tough sell. And Fiat isn’t even Chrysler’s first dance partner: Chrysler's plan makes clear that it would prefer a deal with GM, and failing that, Nissan.

You can kiss your money goodbye. Chrysler’s plan says that if the firm is forced to liquidate, “first-lien” lenders would get back about 25 percent of their money, while the lowly American taxpayer would only get back about 5 percent of the $4 billion they’ve already given Chrysler. So in less than three months Chrysler has devoured its first round of bailout money, and we can’t expect to get it back unless we dole out more money. Now there’s a deal you couldn’t possibly refuse. Or accept, for that matter.

[arnaldoabru 11]

To be perfectly blunt and honest about it, this really pisses me off.

GM said it might need as much as $100 billion in financing from the government if it were to go through the traditional bankruptcy process. Rick Wagoner, GM's chairman and chief executive, said the bankruptcy scenarios are "risky" and "costly" and would only be pursued as a last resort. (Really? Well guess what - it’s even more “risky” and “costly” for the taxpayer to give GM another 100 billion bucks (and further on in the article it is acknowledged that a pre-packaged bankruptcy would cost about 30 billion).

So far, GM has received $13.4 billion in U.S. loans; its plan said the company needs a total of $30 billion in aid, or $16.6 billion more than it has now. GM also said it needs at least $7.7 billion in loans from the Department of Energy to develop fuel-efficient technology.

But the union and the auto makers remained at odds over the largest sticking point: new terms for how the car companies will put billions of dollars into trust funds to cover the cost of health care for retired union workers. The auto makers want to pay a portion of their cash obligation to the funds with stock instead. The funds are known as VEBAs, or voluntary employee beneficiary associations.

On Sunday, GM received a letter from its bondholder committee outlining its framework for restructuring $29 billion in company debt by swapping debt for stock. "This framework is consistent with the government's objective in the U.S. Department of the Treasury's term loan of substantially de-leveraging GM but also provides that bondholders must receive fair and equitable treatment vis-a-vis other GM stakeholders," the letter said.

Tuesday's announcement signals GM's management has softened it view on a possible bankruptcy filing. In the past Mr. Wagoner has insisted bankruptcy was not an option for the company. But in the recovery plan the company described two alternative scenarios in addition to a traditional filing.

The plan says a "pre-packaged" bankruptcy, in which new terms with unions, suppliers and creditors are hammered out in advance, might require only $30 billion in debtor-in-possession financing. In another scenario known as a "cram-down" bankruptcy, GM could try to restructure its debt over the objections of creditors.

http://online.wsj.com/article/SB123489494750801713.html

GM claims its going to pare down its working force and model line. But what isn’t clear is how it plans on eliminating the legacy costs which still make it uncompetitive. Does anyone know what would require them to confront that issue? That’s right - bankruptcy.

You know part of the contract through out our history ( wither written or unwritten) was this between the American Worker and companies. -' You bust your ass, you work hard for this company and we will take care of you when you can no longer work; i.e. retirement and health benifits.

So if the American worker is spoiled, and companies should no longer have to provide health benefits to employees( active or retired) I am assuming you all then believe we need National Health Care.

[BamaGrad03 0]

So if the American worker is spoiled, and companies should no longer have to provide health benefits to employees( active or retired) I am assuming you all then believe we need National Health Care.

No. I believe that if GM entered a sweetheart deal (for the UAW), that was unaffordable...then they were well within their rights to continue that deal as long as they were profitable.

But now, GM is a FAILED company. Failed companies don't get the right to continue failed business models, and shouldn't get to dictate financial terms when they have their hands out.

Never was there a written or unwritten contract that said: "You get overpaid on an assembly line for 25 years, and when you retire, we'll provide you with a great sweetheart deal...even after we go tits up."

GM entered that contract with the UAW, not american taxpayers.

[DKW 86 8,212]

GM entered that contract with the UAW, not American taxpayers.

BINGO! GM is tits up, not the American taxpayer. Go to bankruptcy court and get profitable again. If the retired workers lose their benefits let them go to court and get them back from GM management that promised them. Letting the retired employee benefits destroy the working company is the worst outcome. At least save the company and the active employees rather than lose it all. Again, there is an agreement to let the UAW run the pension plan. The UAW however will not think about taking it over until 2010 or 2011 when the agreement starts. Why wont they go ahead and take it over now? No one knows. The bleeding continues for another 3-4 years as GM projects, we may be out $100-125BN in bailout cash and own a bunch of worthless stock.

Watch what happens to Chrysler. If they go under this year, which most are projecting, and the American taxpayers gets $.05 on the dollar for the bailout, this whole thing will change over night. The 65% not wanting bailouts will swell toward 85-90% and then the Administration wont be able to defend it anymore.

Bamkruptcy doesnt mean they shut the doors. It simply means they reorganize.

[Tigermike 4,246]