Detroit's auto makers on Tuesday presented far-reaching restructuring plan to Congress, hoping for a combined 34 billion U.S. dollars in the low-cost loans from the federal government. The auto makers, struggling to remain viable, as they quickly burn through cash, also known steep decline in U.S. sales for the months of November, underscores the desperate situation of the industry.
House Speaker Nancy Pelosi, D-East., Said late Tuesday, that bankruptcy is not an option for the big three auto companies, and that she believes that the company would ultimately be saved. Senate Majority Leader Harry Reid, D-Nev., Said he hoped to provide the loans to the auto makers as soon as Monday, when he stopped briefly to make promises.
THE PLANS:
General Motors Corp. (GM), the largest of the three Detroit, said she shutter more factories, slash executive pay and ax some of its brands, because they deal with 18 billion U.S. dollars in the form of loans. The company, which has repeatedly rejected bankruptcy as a possibility, said there is a risk running out of the money it needs for operations by the end of the year without a cash infusion of 4 billion U.S. dollars this month. GM also said it is negotiating with bondholders to reduce debt costs of the company, and will be concessions with the United Auto Workers union.
Ford Motor Co. (F) aims to provide access to up to 9 billion U.S. dollars in government bonds, although the company - which has a better cash position than their domestic counterparts - said it would not tap the credit line, unless Business conditions deteriorate or a bankruptcy of another car company increased financial pressure. Ford, which hopes to restore profitability in 2011, is to promote the production of small cars and increase spending for new technologies. Ford is also with the UAW to cut costs further.
The Chief Executive of GM and Ford, stung by the public relations mess caused by the recent comments in Congress hearings, said she is ready to accept the salaries of $ 1 per year. Ford plans to sell its five corporate jets, while GM will no longer be used corporate aircraft.
Chrysler is the request for a 7 billion U.S. dollars bridge loan until the end of December. The company, which estimates its treasury stocks could dwindle to $ 2.5 billion at year-end, said liquidity could drop below required levels from the first quarter. The company said it will continue to improve its cost structure, streamline its operations, more fuel-efficient products and focus on alliances as part of its restructuring.
The sales figures:
U.S. auto sales fell in November to their lowest annualized rate since October 1982, according to Auto Data Corp. The annualized stood at 10.18 million in November, after 37% from a year ago.
Each of the six top auto makers on the U.S. list posted sales declines of over 30%, with three of them show decline of more than 40%, as economic uncertainty and tight credit weigh on consumer prices mood. Chrysler, GM and Ford sales decline of 47%, 41% and 31%, respectively.
MARKET response:
After an up-and-down day, auto-sector shares closed sharply higher as investors focused on optimism that emergency funds could be in the Offingen. GM shares closed 5.7% higher at 4.85 U.S. dollars, while Ford shares rose 5.9% to 2.70 U.S. dollars. Chrysler, owned by Cerberus Capital Management, does not trade publicly.
What the companies say,
- "There is not a Plan B," said GM Chief Operating Officer Fritz Henderson. "Without support, the company can not be used to finance their activities."
- "If the downturn is longer and deeper than we now expect ... access to public funding would be important, so we have the opportunity to continue to implement our plan and benefits, if the economic recovery inevitably comes," Ford said in his Letter to Congress. "While we hope we do not have to access the loans, we believe it is crucial that the loans are available to us and the domestic automobile industry."
- "Without immediate financial support bridge, Chrysler's liquidity could fall below the level adequate to ensure operations in the ordinary," Chrysler said in its letter. "If the request does not act now, will hurt many American families and our country to undermine the economic recovery, predominantly the costs associated with supporting an industry that touches every district in every state of the nation."
- "Forget about calling in the next year, we are working hard to make next month and next quarter," Ford marketing chief Jim Farley said during a telephone conference on the difficulties of forecasting in sales will recover.
- "I've never seen anything remotely close to this" GM sales chief Mark LaNeve said sales environment, and added that it was "stunning" to see declines of this magnitude across the board for auto makers .
WHAT'S NEXT:
The CEOs of GM, Ford and Chrysler will be in Washington for the Congress hearings on Thursday and Friday to discuss the details of their plans with the legislators. In hearings last month, executives not to convince lawmakers that the company had viable recovery plans, to justify using taxpayer money.
The executives will travel to Washington this time, after the capture of heat for every business aircraft under to participate in the earlier hearings.
