GM's Bailout Request Would Fund Massive Changes
All three major U.S. automakers submitted plans to Congress Tuesday outlining how they would spend the money they’ve asked the federal government to provide in order to save them from bankruptcy – but only General Motors outlined plans for a massive restructuring of its operations. GM’s plan would shutter several major auto brands, close plants, eliminate tens of thousands of jobs and renegotiate union contracts. It would also require more money from the federal government — $18 billion — than Ford and Chrysler’s recovery plans combined.
The Detroit News explains, “The cuts range from symbolic — ending corporate jet travel –to substantial — closing 1,750 dealerships — and are aimed at transforming one of America’s largest and most storied companies into a leaner, profitable and more competitive automaker.” GM currently employs 96,000 workers, but has set a goal of employing between 65,000 and 75,000 workers by 2012. The company says the change would “involve negotiating with the United Auto Workers to change wages and GM’s obligations to a UAW-run health-care trust fund.”
Reuters adds, “GM will look to drop its Pontiac, Saab and Saturn brands in addition to Hummer, now being shopped to potential bidders.” Instead, the company “will focus on Chevy, Cadillac, Buick and GMC. Those four brands represent about 83 pct of current sales.” Pontiac may survive as “a specialty niche brand with few vehicles on offer,” but could not support its current dealership network. Saab will be offered for sale to foreign automakers, while GM says only that it will “meet with Saturn dealers to consider options for the failed brand.”
The plan sets a goal of trimming GM’s dealership network from 6,450 locations to just 4,700 by 2012.
Autoblog notes, “In exchange for government loans, GM is also open to a government oversight board that would monitor how the money is used, as well as giving taxpayers a stake in the company. Also, not only would [Chief Executive] Rick Wagoner get his salary dropped to $1, a number of other unnamed senior execs would get pay cuts, too.”
GM attempted to make clear to Congress what it believes could happen if the loans are not offered. The report claims, “Absent such assistance, the company will default in the near term, very likely precipitating a total collapse of the domestic industry,” according to the AP, which would have “a ripple effect that will have severe, long-term consequences to the U.S. economy.” To ward off that possibility, the company says it will need “$4 billion by the end of December and a separate $6 billion line of credit in case market conditions worsen.”
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