Noting the increasingly dire economy, General Motors and Chrysler asked the federal government yesterday to lend them $14 billion above and beyond what they had previously sought, raising the possibility that the automakers could continue to seek federal bailout aid for years to come.
In viability plans submitted late yesterday to the Treasury Department, the automakers outlined a series of cost-saving cuts and structural overhauls they hoped to enact but hinged their success on gaining access to considerably larger amounts of taxpayer-funded bailout loans.
To stay afloat in the face of steep sales declines, GM said it would cut an additional 47,000 jobs this year, close five more U.S. factories, halve its vehicle brands in the United States and cut the number of models it sells by a quarter. Chrysler said it would eliminate 3,000 employees, cut production by 100,000 units and kill three models.
To accomplish that, GM said it would need up to $30 billion in loans by 2011, including the $13.4 billion it has received, and opened the possibility to requesting further aid through 2014. The world's largest automaker said it could run out of money by March without new funds. Chrysler said it would need $9 billion in U.S. aid, including $4 billion it received in early January.
News of the Detroit companies' requests came on the day that President Barack Obama signed into law the $787 billion economic stimulus package. Worries that the legislation would not be sufficient to turn around the ailing U.S. economy contributed in part to a 298-point decline of the Dow industrial average, leaving it less than a point above the five-year low it set in November.
The automakers submitted the plans under terms of the original loan agreements in December. Top Obama economic advisers will begin reviewing the plans this week and will determine by March 31 whether they would ensure the car companies' long-term viability.
If not, Obama could require immediate repayment of the $17.4 billion, almost certainly triggering bankruptcy for both companies.
"It is clear that ... more will be required from everyone involved - creditors, suppliers, dealers, labor and auto executives themselves - to ensure the viability of these companies going forward," White House press secretary Robert Gibbs said last night.
Obama administration officials did not respond to requests for comment on how much more money the government would be willing to lend to the two automakers, which have suffered huge losses and declining cash positions as sales have plummeted during the past year. Through the first nine months of 2008, GM lost $21 billion, and the company said in November that it would no longer be able to pay suppliers if it did not receive government aid.
An Obama administration official said the increased size of the car companies' financial requests was expected.
The money to fund them probably would continue to come from the $700 billion rescue fund, of which $387.5 billion has been committed. Obama is expected to unveil a plan today to stem the tide of mortgage foreclosures that is expected to require up to $100 billion more, while another unspecified chunk of the fund is likely to be used to help buy toxic assets from financial institutions.
Ford, the second-largest U.S. automaker, has not requested federal aid, though it has left open the possibility if market conditions decline further.
As part of its plan, GM said it would eliminate its Saturn line after 2011 if it could not find a buyer, decide by the end of March what to do with the Hummer line and attempt to sell its Saab unit or put it in bankruptcy in Sweden. Selling or eliminating those brands would leave GM to focus on Chevrolet, Cadillac, GMC and Buick, with Pontiac reduced to one or two models.
Chrysler would eliminate the Dodge Aspen and Durango and the Chrysler PT Cruiser, according to company President Jim Press.
The GM 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. About 26,000 of the cuts would be outside the United States. The cuts would take place by the end of the year and represent the largest work force reduction announced by a U.S. company amid the economic downturn.
Under the new plan, GM's work force in the United States would decline from about 92,000 hourly and salaried employees at year-end 2008 to 72,000 by 2012.
Chrysler, which received $4 billion in low-interest loans from the Bush administration in December, requested an added $5 billion to stay afloat. The total tops the $7 billion it had requested from Congress late last year, reflecting reeling auto sales. Chrysler had 54,007 employees at the end of 2008; the cuts announced yesterday would be about 6 percent of its work force.
GM and Chrysler said they had prepared plans for Chapter 11 bankruptcy filings, as well as liquidation, a procedure they said the Treasury Department had requested. The automakers insisted that they preferred not to take the bankruptcy route and that they would be viable if they receive the additional federal loans.
Obama administration officials have not ruled out the possibility of a government-backed, structured bankruptcy. But the White House press secretary reiterated yesterday that "a strong and viable auto industry is tremendously important for the future."
"Obviously, there are different paths that can be chosen," Gibbs said. "And we're anxious to see what type of restructuring details each of the automakers themselves have put together in conjunction with their bondholders, their employees."
House Speaker Nancy Pelosi, a California Democrat, said she hopes the carmakers' plans would help lead to the "transformation of our domestic automobile industry into a viable, technologically advanced and globally competitive manufacturing force."
She said, "Congress looks forward to working with the Obama administration" to make the domestic auto sector competitive "while ensuring accountability to the taxpayers."
The United Auto Workers union and the three automakers reached a tentative agreement on contract concessions yesterday, about the time that GM and Chrysler filed restructuring plans.
Terms of the deal were not announced, but they were expected to eliminate the jobs bank in which laid-off workers get most of their pay, as well as make work rule and other changes that the government loan terms set out so the companies' labor costs are competitive with those of Japanese counterparts that build cars in the United States.
But the union was unable to make a deal with GM, Chrysler and Ford Motor Co. on funding for a trust fund that will take over retiree health care costs starting next year.
Union President Ron Gettelfinger said in a statement that discussions are continuing with all three companies about billions of dollars in cash payments into the trust funds, called voluntary employees' beneficiary associations.
The Associated Press contributed to this article.