Updated from Tuesday, Feb. 17
now says it may need more than $30 billion in loans from the federal government, a sign that the outlook for auto sales has deteriorated precipitously since the start of the year.
The expanded request was part of the viability plan submitted to the Treasury Department on Tuesday. On a conference call with reporters, CEO Rick Wagoner noted that GM had sought $18 billion in December, when the Bush administration approved $13.4 billion. Additionally, he said, GM cannot assume its $4.5 billion revolving credit line will be renewed on maturity in 2011, so it wants the government to fund that.
Looking further ahead, if a newly revised, gloomier downside scenario for 2009 through 2011 pans out, GM could require another $7.5 billion, bringing the total to $30 billion. Beyond that, if GM must fund pension plans in 2013 and 2014 -- this is an open question, GM said -- the need could extend beyond $30 billion.
Comparing Tuesday's plan to the restructuring plan GM presented to Congress in December, Wagoner said: "Today's plan is significantly more aggressive because it has to be. The condition of the U.S. and global economies as well as the auto industries has significantly deteriorated."
Now, GM fully anticipates the worst-case scenario it outlined in December, one that includes 2009 domestic vehicle sales of 10.5 million and global sales of 57.5 million. And it has developed a new, even gloomier downside scenario that anticipates domestic volume of 9.5 million in 2009 and 11.5 million in 2011. The last time domestic volume fell below 10 million, according to J.D. Power & Associates, was 1970, when sales totaled 9.8 million.
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.
. 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
, both of whom would have to make concessions before the companies present restructuring plans on March 31.
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.
Will the Obama administration choose to expend its capital, political and financial, on such a massive bailout? No doubt the question will soon be a headace for the new president and his team, given the public's mixed opinion and congressional Republicans' firm opposition, when automakers sought federal assistance in December.
Asked whether the Treasury was aware that GM would seek more money, CFO Ray Young responded: "We've been in regular contact with Treasury, we submit regular cash forecasts, (and) they fully understand we will be coming in with additional requirements."
Meanwhile, Wagoner noted that
, including the Chevrolet Volt, that reduce dependence on foreign oil. Additionally, Wagoner said he anticipates that President Obama will be receptive, given the administration's focus on stimulating employment. "The role the auto industry plays, it's a powerful job creator," he said.
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