Bosses present revised scheme to secure government funds
3 December 2008

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.

Will it work?

Initial responses to the plans appear to be more positive.

"We'll do everything we can to take care of the auto industry,” said Senate majority leader Harry Reid, who told reporters he wanted to see legislation on the Senate floor by Monday.

It’s understood that senators are privately leaning on President-Elect Barack Obama to be more supportive.

But the White House remains ominously reluctant. Increasing their aid request to $34bn could prove problematic for the car makers.

Commerce secretary Carlos Gutierrez said the Bush administration “wasn’t ready to support” more than $25bn in aid.

Ford CEO Alan Mulally, Chrysler CEO Robert Nardelli and General Motors CEO Rick Wagoner will all return to Congress later this week to testify about the aid request.

Wagoner said he believed the case was “more compelling” now.

Symbolically, all three will drive to Washington in hybrid cars after being criticised for arriving by private jet for their last meeting. Ford has now put its fleet of five planes up for sale and GM’s selling four of its seven.

All three CEOs have committed to a $1 salary next year, if it helps the US Senate release the money their firms so desperately need.

Will Powell

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Comments
6

3 December 2008

No plan "B". Are they kidding? So what is their plan then? Just to take the money and continue buidling huge motors with extremely inefficient engines. I was on US Ford webiste last night looking at their cars. I am gobsmacked that their engines produce so little power for their size. Perhaps if they just scrapped their US line-up and brought in the European designs (with twice the MPG) the maybe the US punters might buy them.

3 December 2008

when you see the fuel figures it quite amazing i.e. 30mpg is considered (state side) to be pretty good; that is changing and quite rapidly so.....the americans are exceptional (world beaters) when they want/put their minds to things....the USA has brilliant people and is a brilliant country.

I would say also do not just restrict to Ford US website, have a look around at others; look at the Toyota site i.e. the Tundra or the Venza (look at the fuel consumption figures), look GM and Nissan (Maxima); you will find the same.

People have to really want them higher fuel efficiency in large numbers and that is occuring which is brilliant and our cars have been quite small (the new Mondeo is massive by comparison the Serria), so not all cars are truly directly transferable to cover all sectors and again people have to want them (Ford tried the MK1 Fiesta in the US years ago)

You also have to think US geograhpy and understand car travel is a right (US) not a privilege (typically EU); in the US the place is huge, cars very needed in different ways to the EU; the cities are massive, I was in Texas not so long back and you need a car........its not the same as the EU i.e. the cost of cars has prodominately needed to be more widely accessible in the US compared to the EU.

But the american consumer is changing their stance, sure you will have the next series F-150 (probably also the Tundra etc) but the other car sectors are getting more EU cars, but thus cars are bigger (look at the Mk1 golf to the present golf).....thus you are seeing these things move together (merge)......and once the US get into it, they will fly with it (like the wind farms, the solar energy etc.....technology is the answer they have lots!)....these are exciting times like no others.

3 December 2008

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

3 December 2008

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.

Loving life in France with my Springers

3 December 2008

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...

3 December 2008

North and Dillonsamben off tiptoeing through the tulips again, I'm afraid.

Fuel economy ? Baloney. It's down at $2 a gallon again in the US. Still a factor, sure, but no longer anywhere near the consideration of losing one's house nor being able to borrow the money to fund a car with credit from somewhere.

Car travel a privilege in Europe ? Total rubbish. You can buy a car with an MOT for £500. Maybe less. Anyone can and does drive.

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