GM Loans May Top $30 Billion

Not only did GM ask for more money, it also disclosed that its Saturn brand would either be spun off, sold or closed once the 2011 product cycle concludes, likely in 2012. GM said it will cut 47,000 jobs this year, 19% of its work force; close five additional auto plants by 2012; reduce its product line to 36 named models by 2012, four fewer than earlier planned; continue to reduce the number of dealers and sell or phase out Hummer by March 31.

Also, for the first time, executives discussed in detail the scenarios for various types of bankruptcy: the discussion was a condition of the loan agreement with the Treasury.

Among the problems with bankruptcy, said President Fritz Henderson, is that no private lender would provide the debtor-in-possession financing that enables a company to continue operating while under court protection. Thus, without government financing, GM would shut down, he said. The cost of DIP financing could range from $9 billion in a brief consensual bankruptcy, to $100 billion -- including some help from foreign governments -- in a traditional, stretched-out Chapter 11 filing.

Earlier Tuesday, Chrysler laid out a similar but smaller-scale scenario. Chrysler said it now projects 2009 domestic sales of 10.1 million units, followed by average sales of 10.8 million between 2009 and 2012. As a result, it now wants $2 billion more than the $7 billion loan it initially sought from the federal government. It too acknowledged that bankruptcy is a possibility, with liquidation possible if it cannot secure DIP financing.

Additionally, Chrysler, like GM, said it has made progress in talks with debt holders and the United Auto Workers, both of whom would have to make concessions before the companies present restructuring plans on March 31.