Black Hole: GM to Seek Another $30 Billion in Aid, Will Cut 47,000 Jobs
February 18th, 2009Via: AP:
General Motors Corp., presenting a dire outlook for the future, said Tuesday it may need $30 billion in total government financing to weather the economic downturn and would cut 47,000 jobs worldwide and shutter five more U.S. factories in a massive restructuring plan.
The automaker is already surviving on $13.4 billion in federal loans and said in a plan submitted to the Treasury Department that it would seek an additional $16.6 billion if economic conditions worsen, but it could achieve profitability in two years and fully repay its loans by 2017.
The U.S. automaker presented its turnaround plan to the Obama administration as it worked to win concessions from the United Auto Workers union and bondholders to dramatically resize the company. The UAW said it reached a tentative deal with GM, Chrysler LLC and Ford Motor Co. on contract changes but discussions were still under way about how the companies would fund union-run trust funds that will take over the companies’ retiree health care obligations starting next year.
GM said it was making progress but had not yet achieved all the concessions from union workers, debt holders, dealers and suppliers that the Bush administration sough in the loan terms provided last December.
President Barack Obama’s administration will review the plans from GM and Chrysler LLC but could pull the loans if they don’t approve the turnaround plans by March 31. The review could be extended into April, but if the government demands the money back it would force the companies into bankruptcy.
GM predicted it could run out of money before the March deadline and said it is seeking the additional funding under a worst-case-scenario projection, as U.S. sales have plummeted to a 26-year low and auto sales have fallen in other parts of the world.
In December, GM said it might need a total of $18 billion in government financing but only got a commitment of $13.4 billion, including $4 billion that the automaker received Tuesday.
GM wants to receive an additional $2 billion in March and $2.6 billion in April. The company has a $4.5 billion revolving line of credit that must be refinanced in 2011 but now believes that private funding won’t be available, so the automaker is asking the government to lend the money.
If market conditions deteriorate, GM says it may also need an additional $7.5 billion revolving line of credit to stay afloat, for a total potential request of $30 billion.
GM said it reviewed the potential costs of a bankruptcy filing, but said it was a poor option. If GM was forced into Chapter 11 reorganization proceedings, the company said the only credit available would be from the government, and the cost could reach as much as $100 billion.
I wish there were any American cars worth buying. I actually drive an “American” car right now. It’s only American as far as the branding. The engine is a mitusbishi under a Chrysler badge. I am looking around for new rides right now and sadly, there is nothing made by an American maker worth considering. At all. The designs are bad, there are no viable electric options . it infuriates me that the only way to get an electric car these days is to have too much money to need one (tesla), or wait for three or four years for the blocky, shameful, Volt or the rolling sperm cell that is getting all the buzz these days. It seems pretty simple to me, design a car worth owning.
And for gods sake, for a supposedly “free market” we sure do hate competition.