GM to seek more federal aid

DETROIT -- General Motors Corp. will ask for billions more in federal aid today when it submits a restructuring plan to the U.S. Treasury Department outlining cuts that will dramatically shrink the iconic but troubled American automaker.

But GM's recovery plan and one from Chrysler LLC, due today as a condition of a $17.4 billion federal loan package, are not expected to include key money-saving concessions from the United Auto Workers and bondholders.

Despite long negotiations over the weekend and Monday, neither automaker was expected to reach agreements by today's deadline, sources said. The loan terms call for GM and Chrysler to restructure their payments into a UAW-run retiree health care trust and to reduce their unsecured public debt by two-thirds.

Failing to get the concessions by today does not threaten the loans as long as GM and Chrysler can show they are working toward those targets. But the givebacks must be secured by the government's March 31 deadline for the automakers to show they are making progress toward viability or the loans could be called back, forcing bankruptcy.

GM has received $9.4 billion in loans and Chrysler $4 billion -- money that has kept the companies afloat in the worst U.S. sales market since the early 1980s. An Obama administration official said GM is on schedule to receive an additional $4 billion today.

In its plan, GM will disclose global cost cuts that could include about four new plant closures in Europe, a person familiar with the plan said, who called it a work in progress. GM also will expand previously announced plans to close nine plants by 2012, eliminate 1,750 dealers and cut up to 31,000 employees and provide a more specific timetable for the reductions. But GM isn't expected to identify any of the targeted U.S. plants.

The automaker also is expected to provide more detail on plans to close, shrink or sell its Pontiac, Saab, Hummer and Saturn brands.

GM also will discuss the possibility of a bankruptcy filing. The company was asked to address it, said Rep. Sander Levin, D-Royal Oak. "(But) bankruptcy would be disastrous," he said. "Bankruptcy means failure and failure is unacceptable."

It is not clear how much more money GM will request. The automaker originally sought $18 billion before President Bush approved the $17.4 billion package. The automaker told Congress in December that it could need $15 billion by March 31 if the U.S. sales rate fell to 9.9 million vehicles a month on an annualized basis in the first quarter. The rate fell to 9.6 million in January.

The Detroit automaker is expected to electronically submit its plan to the Treasury Department after the market closes today. Chief Financial Officer Ray Young will visit Capitol Hill to brief lawmakers Wednesday.

Chrysler's plan will demonstrate how it can survive on its own with an additional $3 billion. It will include a second option that shows it would be more global and prosperous with an alliance with Italy's Fiat SpA., which depends on Chrysler getting the $3 billion. The company also plans more factory capacity cuts and could cut some models.

Sean McAlinden, chief economist and vice president for research at the Center for Automotive Research in Ann Arbor, believes the automaker needs to cut North American capacity in half, or close about six plants.

Deadline is first step

Today's deadline is a preliminary step. Both automakers must show significant progress toward becoming viable companies by March 31, or the U.S. Treasury Department could recall the loans.

Two of the biggest and thorniest issues for GM are restructuring payments into the UAW health care trust and convincing bondholders to agree to a complicated debt exchange, which would cut the automaker's unsecured debt by two-thirds to $9.2 billion. Sources have told The Detroit News that bondholders want more money in exchange for forgiving billions in debt.

"I don't expect either side will have something signed by (today)," said a source familiar with GM's negotiations with bondholders. "It will take longer ... to get to the right place where bondholders feel like they are being treated fairly and to feel like the company can emerge from the restructuring in a better place."

UAW talks progress

The UAW, meanwhile, briefly suspended talks with GM late Friday over health care funding. A loan target requires the union to accept half of the funding for the health care trust in cash and the other half in company stock. The proposal called for a smaller cash portion. Talks resumed Sunday. "In general, we're making progress with the UAW," a source familiar with talks between GM and the union said Monday.

There has been speculation that the UAW and bondholders are resisting in hopes the government will simply loan GM more money rather than force the automakers into bankruptcy.

While both automakers pursue concessions, they continue to lose about $4 billion a month despite the federal loans.

"It's not (today's) deadline that's important," said analyst Aaron Bragman of IHS Global Insight. "It's how quickly will these companies run out of cash."

Reach Robert Snell at (313) 222-2028 or rsnell@detnews.com">rsnell@detnews.com.