General Motors and Chrysler will collapse before the end of the year if the giant manufacturers don’t receive massive US government aid now.
That was the stark message delivered to Congress yesterday in reports from GM, Chrysler and Ford, which set out drastic new business strategies and requested a combined total of $34bn to stay solvent.
Urgent aid
GM needs $4bn immediately and at least $10bn more before the end of March to stay afloat.
In all, America’s biggest car manufacturer has asked for $18bn, made up of $12bn in soft loans and a $6bn credit line.
"Absent such assistance, the company will default in the near term, very likely precipitating a total collapse of the domestic industry and its extensive supply chain, with a ripple effect that will have severe, long-term consequences to the U.S. economy," GM warned in its plan.
“We have no plan B,” admitted GM’s chief operating officer, Fritz Henderson, in a conference call with reporters.
Chrysler, meanwhile, requested $7bn immediately. And Ford, seemingly best placed of all three, asked for $9 billion but noted that it would not access the money unless its situation worsened.
Future strategies
It was the second appeal to Washington within a month, with all three manufacturers seeking to present themselves as flexible, innovative and environmentally aware going concerns.
“As a company and as an industry, we readily admit that we have made our share of mistakes and miscalculations,” said Ford in its 36-page dossier. "We recognise that our business model needed to change, and we are changing it”.
All three companies focused on cutting emissions with new products. Ford said it was accelerating its hybrid and EV program while Chrysler and GM promised smaller, more frugal cars in future.
Drastic measures – Saab could be sold
It was GM that revealed the most dramatic cutbacks. It will axe tens of thousands of jobs in a global effort to streamline operations. GM’s dealer network will be reduced by one quarter.
Saab will also suffer and is likely to be sold. Its one of four brands that GM says it will sell or shrink alongside Pontiac, Saturn and Hummer.
The firm’s strategy will see its debt shrink from $65.6bn to £30bn and, it says, break even by 2012.
Chrysler did not make public the 100-page future plan report it sent to Congress, but said it continued "to aggressively pursue strategic alliances and partnerships" in an effort to secure its future. Merger talks with Renault-Nissan were put on hold earlier this year.
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Re: GM: "There is no plan B"
I can understand where you're coming from with that Roger but, to be fair to GM, over the last 4-5 years the quality of their vehicles has improved dramatically and some of the recent introductions they've made all over the World are excellent vehicles. Everyone has been caught out by the current financial situation even the star players like Porsche and BMW. The only reason Ford is not in a worse state than GM is because they borrowed huge amounts of money a couple of years ago. Chrysler are in a marginally better position because they got a soft deal when Daimler booted them out. Of the Big 3, by far the best vehicles in production now are from GM; its just a shame that the music stopped before they sat down...
Re: GM: "There is no plan B"
I wholeheartedly agree with you NORTH.
A vast number of Americans are almost exceptionally capable but surely it is their work ethic which will surely now bring down quite a lot of their businesses ?
The very sad fact about the commerce ethic of borrow, borrow, borrow pay the share holders a dividend etc. is that it is all 100% OK when things are going well, but when the tide turns and the cash stops flowing, then it is only a relatively short time before the baying wolves are at the door.
I know it was a very long time ago, but when the Wall Street crash happened in the States it was the companies with high levels of borrowing that went quite literally to the wall first and in the World economy motor industry, history might well be seen to repeat itself !
Just look at the entire GM American product base and even a chocolate bar lover (!) would surely say it was dire and very much the same goes for the Ford and Chrysler product mix as well. So from where I am sitting the chances of escape for GM are more than somewhat questionable.
Re: GM: "There is no plan B"
I would never buy another GM car so let them go into administration. They have only themselves to blame as they have made unappealing cars in Europe and the US for years, with one or two niche market exceptions