GM, Chrysler to get additional short-term aid

David Shepardson / Detroit News Washington Bureau
WASHINGTON -- President Barack Obama will provide General Motors Corp. with short-term "working capital" as it conducts additional restructuring, while providing short-term aid to Chrysler LLC as it works to complete a tie-up with Fiat SpA.

Obama told four key Michigan members of Congress during a Sunday night conference call that he would grant unspecified additional aid to GM for 60 days and Chrysler for 30 days, according to a person familiar with the call.

Obama said GM Chief Operating Officer Fritz Henderson would take over the automaker on an interim basis and that no management changes at Chrysler were forthcoming.

The White House demanded and received GM Chairman and CEO Rick Wagoner's resignation as part of the aid request.

The call included Sen. Carl Levin, D-Detroit, and Sen. Debbie Stabenow, D-Lansing as well as Rep. Sander Levin, D-Royal Oak, and Rep. John Dingell, D-Dearborn.

UPDATE: Early reports indicate that Chrysler will receive $6 billion in federal aid and over the course of the 30 days, Chrysler will likely give up a 35% stake to Fiat.

Source (via autoblog.com);
http://www.detnews.com/article/20090329/AUTO01/903290337/1148/rss25

GM loses $9.6 billion in last quarter bringing the total to $30.9 Billion for 2008

Embattled automaker reports larger than expected in fourth quarter loss and burns through more than $5 billion in cash; says it needs new loans this year.

By Chris Isidore, CNNMoney.com senior writer
Last Updated: February 26, 2009: 9:51 AM ET

NEW YORK (CNNMoney.com) -- General Motors posted a $9.6 billion net loss in the fourth quarter, a period in which its sales plunged and it needed a federal bailout to avoid filing for bankruptcy.

The company also disclosed that it burned through $6.2 billion in cash during the last three months of the year. The company ended the quarter with cash of $14 billion.

If not for the $4 billion federal loan it received in the quarter's closing days, GM's cash level would have fallen below the $11 billion to $14 billion in cash the company has said it needs to continue operations.

Since receiving the first installment of that loan, GM (GM, Fortune 500) has gotten another $9.4 billion in federal assistance. The company asked for an additional $16.6 billion in the turnaround plan it submitted to the Treasury Department last week. GM disclosed Thursday it will need this at least $9 billion of that money in 2009 to weather the current downturn.

The company is expecting to burn through another $14 billion in cash this year, with most of it taking place in the first quarter as the company struggles to deal with weak demand and significant overhead costs.

GM chief financial officer Ray Young said the company's request for more loans was made with that weak outlook in mind.

"We're not forecasting any heroic recovery for the industry in '09," he told investors.
The company also said it anticipates its outside auditors will issue a statement on whether the company is a "going concern." The statement could be important not only to investors but to federal officials who are determining whether the company is viable in the long-term.

If the government determines GM is not viable, it would demand immediate repayment of the company's loans.

The auditor's statement will be included in GM's year-end results filing with the Securities and Exchange Commission. GM disclosed Thursday it had filed for a two-week extension to submit that report.

The company also disclosed that its hourly and salaried pension plans are currently underfunded, on a combined basis, by about $12.4 billion. But GM said it does not anticipate needing to make a further contribution to those funds over the next three years.

GM facing challenges around the globe

As bad as GM's results were, it could have been worse. The company posted a $533 million gain because of the fact that GMAC, the finance unit in which it held a 49% stake during the quarter, got its bond holders to agree to swap debt for equity. GMAC become a bank holding company as a result of the debt swap, which significantly reduced GM's stake in the unit.

Excluding special items, GM lost $5.9 billion, or $9.65 a share, in the quarter. Analysts surveyed by Thomson Reuters had forecast a loss of $7.39 a share, compared to a profit of 8 cents a share on that basis a year ago.

The operating losses were particularly pronounced in GM's core North American market. It lost $3.5 billion before taxes in the quarter, up from a $1.3 billion loss in North America a year earlier.

Revenue in the North American unit plunged about 32% to $19.3 billion. GM's market share also slid 1.7 percentage points to 21%.

But GM, which now sells more than half its vehicles outside of North America, is facing challenges around the globe.

Losses more than quadrupled in Europe, and the company lost money in its Asia-Pacific and Latin America-Africa-Middle East units. GM posted profits in those two regions a year ago.
Overall revenue at GM plunged 34% to $30.8 billion, significantly worse than the Thomson-Reuters forecast of $35.1 billion.

For the full year, GM reported a net loss of $30.9 billion. The automaker has posted net losses of $82 billion over the past four years as its U.S. sales and market share plunged and it closed plants and slashed staff in an unsuccessful effort to stem losses.

Shares of GM fell about 8% in early morning trading Thursday.

Separately, GM rival Ford Motor (F, Fortune 500) filed its own year-end financial statement with the SEC Thursday. Its filing included an "unqualified" statement from the company's outside auditor that "there is no substantial doubt" about Ford's ability to continue as a going concern.

Because it arranged for billions of dollars of asset-backed loans and lines of bank credit years ago before the current credit crunch, Ford is in a much better cash position than GM and privately held Chrysler LLC.

Ford has yet to need federal loans but it has asked the government for a $9 billion line of credit in case the economy deteriorates further.

First Published: February 26, 2009: 7:19 AM ET

Source;
http://money.cnn.com/2009/02/26/news/companies/gm_results/?postversion=2009022607

Bush Approves $17.4 Billion Auto Bailout, Canada to add $3.48 Billion (20%)

WASHINGTON — President Bush on Friday announced $13.4 billion in emergency loans to prevent the collapse of General Motors and Chrysler, and another $4 billion available for the hobbled automakers in February with the entire bailout conditioned on the companies undertaking sweeping reorganizations to show that they can return to profitability.

The loans, as G.M. and Chrysler teeter on the brink of insolvency, essentially throw the companies a lifeline from the taxpayers that will keep them afloat until March 31. At that point, the Obama administration will determine if the automakers are meeting the conditions of the loans and will continue to receive government aid or must repay the loans and face bankruptcy proceedings.

Mr. Bush made his announcement a week after Senate Republicans blocked legislation to aid the automakers that had been negotiated by the White House and Congressional Democrats, and the loan package announced by the president includes roughly the identical requirements in that bill, which had been approved by the House.

Mr. Bush, in a televised speech before the opening of the markets, said that under other circumstances he would have let the companies fail, as punishment for bad business decisions. But given the economic downturn, he said the government had no choice but to step in.

“These are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action” Mr. Bush said.

He said that bankruptcy was not a workable alternative. “Chapter 11 is unlikely to work for the American automakers at this time,” Mr. Bush said, noting that consumers would be unlikely to purchase cars from a bankrupt manufacturer.

The loan deal also requires the companies to quickly reduce their debt by two-thirds, mostly through debt-for-equity swaps, and to reach an agreement with the United Auto Workers union to cut wages and benefits so they are competitive with those of employees of foreign-based automakers working in the United States.

The debt reduction and the cuts in wages were central components of proposal by Senator Bob Corker, Republican of Tennessee, who tried to salvage the bailout legislation.

Those talks had deadlocked on a demand by Republicans that the wage cuts take effect by a set date in 2009, while the union had pressed for a deadline in 2011 after its current contract expires.

The plan announced on Friday by Mr. Bush offered a compromise between those positions, by making the requirements non-binding, allowing the automakers to reach different arrangements with the union, provided that they explain how those alternative plans will keep them on a path toward financial viability.

To gain access to the emergency loans, G.M. and Chrysler must agree to a range of concessions, including limits on executive pay and the elimination of their private corporate jets.

Under the plan, Mr. Bush essentially handed off to President-elect Barack Obama what will become one of the first, most difficult calls of his presidency: a political and economic judgment about whether G.M. and Chrysler are financially viable. Ford is not seeking immediate government help.

If, by March 30, the two companies cannot meet that standard — and clearly they could not meet it today — the $13.5 billion in Treasury loans would be “called” for immediate repayment, with the government placed in priority, ahead of all other creditors.

To avoid that fate, the companies will need to complete negotiations with the unions, the creditors, the suppliers and the dealers by March 30. Any judgment on the accords they reach with those groups will inevitably be both economic and political.

Mr. Obama and his economic team will have to make a convincing, public case that the wage cuts, plant closings and creditor agreements so change the landscape of the industry that the carmakers can turn profitable in short order.

But Mr. Obama will be under tremendous political pressure as well, because if his new team concludes that the automakers have not struck the right deals, it would mean a move to bankruptcy court, and likely widespread layoffs that would ripple far beyond the companies themselves.

Mr. Obama was elected partly with the enthusiastic support of the unions, who liked his talk of protecting jobs by renegotiating trade agreements. Now, in his first months, he will be asking them to give back gains they have negotiated over decades.

For the rest of the article, follow the link;
http://www.nytimes.com/2008/12/20/business/20auto.html?_r=1&ref=business&pagewanted=print

Say What?!? Big Three CEOs Flew Private Jets to Plead for Public Funds

Above are the 3 wisemen in question, how would you like to be one of the unfortunate workers that just got laid off (just before Christmas) and you see this. Ever wonder why they are in such bad shape?!? It seems like they are just asking for it.

Auto Industry Close to Bankruptcy But They Get Pricey Perk

The CEOs of the big three automakers flew to the nation's capital yesterday in private luxurious jets to make their case to Washington that the auto industry is running out of cash and needs $25 billion in taxpayer money to avoid bankruptcy.

The CEOs of GM, Ford and Chrysler may have told Congress that they will likely go out of business without a bailout yet that has not stopped them from traveling in style, not even First Class is good enough.

All three CEOs - Rick Wagoner of GM, Alan Mulally of Ford, and Robert Nardelli of Chrysler - exercised their perks Tuesday by flying in corporate jets to DC. Wagoner flew in GM's $36 million luxury aircraft to tell members of Congress that the company is burning through cash, asking for $10-12 billion for GM alone.

"We want to continue the vital role we've played for Americans for the past 100 years, but we can't do it alone," Wagoner told the Senate Banking Committee.

While Wagoner testified, his G4 private jet was parked at Dulles airport. It is just one of a fleet of luxury jets owned by GM that continues to ferry executives around the world despite the company's dire financial straits.

"This is a slap in the face of taxpayers," said Tom Schatz, President of Citizens Against Government Waste. "To come to Washington on a corporate jet, and asking for a hand out is outrageous."

Wagoner's private jet trip to Washington cost his ailing company an estimated $20,000 roundtrip. In comparison, seats on Northwest Airlines flight 2364 from Detroit to Washington were going online for $288 coach and $837 first class.

After the hearing, Wagoner declined to answer questions about his travel.

Ford CEO Mulally's corporate jet is a perk included for both he and his wife as part of his employment contract along with a $28 million salary last year. Mulally actually lives in Seattle, not Detroit. The company jet takes him home and back on weekends.

Mulally made his case Tuesday before the committee saying he's cut expenses, laid-off workers and closed 17 plants.

"We have also reduced our work force by 51,000 employees in the past three years," Mulally said.

Yet Ford continues to operate a fleet of eight private jets for its executives. Just Tuesday, one jet was taking Ford brass to Los Angeles, another on a trip to Nebraska, and of course Mulally needed to fly to Washington to testify. He did not address questions following the hearing.

"Now's not the time to do that sort of thing," said John McElroy of the television program "Autoline Detroit."

"Now's the time to be humble and show that you're sharing equally in the sacrifice," McElroy said.

GM and Ford say that it is a corporate decision to have their CEOs fly on private jets and that is non-negotiable, even as the companies say they are running out of cash.

Private jet travel is perhaps the greatest perk of all for CEOs, who say it allows them to travel more efficiently and safely, even in a recession.

AIG, despite the $150 billion bailout, still operates a fleet of corporate jets. The company says it has put two out of its seven jets up for sale and is reviewing the use of others. Though there are no such plans by GM or Ford.

It appears that the senior management of the automakers simply don't get it," said Schatz.

-No kidding.

Source;

http://www.abcnews.go.com/Blotter/WallStreet/Story?id=6285739&page=2