February 18, 2009 at 1:00 am

GM, Chrysler raise aid request by $21.6 billion

Viability plans underscore worsening cash crisis

General Motors Corp. and Chrysler LLC asked Washington for as much as $21.6 billion more Tuesday to stave off bankruptcy, citing worsening economic conditions in new business plans that are likely to provoke fresh criticism of Detroit's embattled auto industry.

Their pleas for more aid, raising the tab for the auto industry's rescue above $40 billion -- which includes a $39 billion bailout for the two automakers plus requests from suppliers -- present a major challenge for the new administration of President Barack Obama. The government wants to help the domestic industry restructure but faces mounting bailout fatigue across the nation.

Yet since the government extended the first emergency loans in December, the already weak U.S. auto market has collapsed to its lowest level since the 1980s.

"In the 11 weeks since the filing of our initial plan, the condition of the U.S. and global economies and the auto industry has significantly deteriorated," GM Chairman and Chief Executive Officer Rick Wagoner said at a news conference after the company submitted its plan.

"This is significantly more aggressive," he said of the plan, "because it has to be."

GM will cut nearly 50,000 jobs worldwide in an effort to return to profitability within two years and begin repaying the loans in 2012. Most of those job cuts will come from GM's overseas operations.

But GM also is increasing the number of U.S. job reductions and plant closures beyond the deep cuts outlined Dec. 2 in its original loan request. It will shutter 14 U.S. factories, five more than it announced in December.

GM has received $13.4 billion in the past seven weeks but said it needs $2 billion more in March and $2.6 billion in April to stay afloat. It may need as much as $16.6 billion under a new worst-case scenario that reflects the deepening of a now global recession.

Chrysler, the smallest of Detroit's automakers, submitted a plan calling for 3,000 more job cuts and said it needed $5 billion more in the next few weeks to stay in business.

But it said its most promising option was to form an alliance with Italy's Fiat SpA. They are in talks.

Tuesday's loan requests, attached to viability plans required by terms of the $17.4 billion in loans they already received, would amount to $39 billion for the two companies, not counting requests for government aid from suppliers.

GM also expects $6 billion in aid from foreign governments and up to $8.3 billion from an Energy Department program to encourage cleaner, more advanced vehicles. It also could get $4.5 billion to speed payments to its suppliers under a separate Treasury Department program.

"I'm very concerned about the slope that we're going down," Sen. Bob Corker, R-Tenn., a harsh critic of the industry, said on CNBC.

Politicians have criticized Detroit's automakers for running sloppy businesses and producing gas-guzzlers that consumers don't want to buy, but the severity of this downturn is hobbling even the world's strongest automakers.

Toyota Motor Corp., Nissan Motor Co. and Daimler AG have all reported losses for the October-December quarter.

"There has been an unprecedented decline in the automotive sector," since early December when Chrysler first requested $7 billion in loans, Chairman Robert Nardelli told reporters.

He said the automaker now expects U.S. auto sales to fall this year to 10.1 million, "which is a 40-year low for our industry."

Rep. John Dingell, D-Dearborn, said the plans contained "dramatic measures" in addition to previous cost cuts. "These changes are painful for everyone involved, and the days ahead are going to be very difficult."

GM and Chrysler addressed the possibility of reorganizing under bankruptcy -- an option that some analysts and lawmakers have recommended.

But they rejected that route. GM President and Chief Operating Officer Frederick Henderson said the money GM would need from the government to operate under a Chapter 11 bankruptcy filing runs up to $100 billion.

But the two automakers still face major hurdles in their efforts to achieve the cost-saving targets set by the government by the March 31 deadline.

GM has run into resistance from its bondholders in its effort to get them to exchange debt for equity. GM and Chrysler are still in negotiations with the United Auto Workers union on the financing for retiree health care funds.

The White House said Monday that a task force headed by U.S. Treasury Secretary Timothy Geithner and Laurence Summers, director of the National Economic Council, would oversee the industry's restructuring.

"We appreciate the effort that these companies and their stakeholders have made, and the president's team will be reviewing these reports closely in the days ahead," White House spokesman Robert Gibbs said in a statement.

"It is clear that going forward, more will be required from everyone involved -- creditors, suppliers, dealers, labor and auto executives themselves -- to ensure the viability of these companies."

In its plan, GM tried to strengthen its case by referring to the collapse of Lehman Brothers -- an event that many analysts believe led to a massive downturn on Wall Street and the credit crunch that spread through the economy.

"The systemic risk to the automotive industry and the overall U.S. economy are considerable, just as the bankruptcy of Lehman had a ripple effect throughout the financial industry," GM said.

The GM and Chrysler plans are based on expectations of a slow recovery in demand. GM has lowered its break-even point to a sales rate of 11.5 million to 12 million vehicles from a range of 12.5 million to 13 million. Chrysler's plan assumes sales averaging 10.8 million cars and light trucks annually through 2012, compared with 16.1 million in 2007.

"Chrysler and GM are both laying out worst-case scenarios on a global basis," said David Cole of the Center for Automotive Research in Ann Arbor. "You aim low, and if sales are higher, then you've got a good story to tell."

In its original $18 billion request, GM assumed that it would be able to refinance a $4.5 billion revolving credit line due in 2011. GM no longer believes that is possible and is asking the government to supply $4.5 billion in additional loans, plus a $7.5 billion revolving line of credit if the market continues to deteriorate.

GM previously said it would cut or shrink several brands, including Saab and Hummer, and focus on four core brands: Chevrolet, Cadillac, GMC and Buick.

Several parties are interested in Hummer, GM said, and it will strike a deal by the end of March or wind down the business. GM also is trying to negotiate a deal for its Saab carmaker with the Swedish government.

Alternatively, GM said the unit might file for reorganization.

Chrysler will make further cuts to its lineup, eliminating the Dodge Durango and Chrysler Aspen SUVs and the PT Cruiser.

Anthony Morris of Warren, an employee at Chrysler's Warranty Center, said workers have already made concessions but expect they will be asked to make more.

"This is a time of uncertainty," Morris said during a lunch break at a nearby restaurant. "I have no Plan B. Some workers who have been displaced have not been finding any kind of job. And I mean even outside of the industry. There are no jobs."

Detroit News Staff Writers Alisa Priddle, Robert Snell, Nathan Hurst and Gordon Trowbridge contributed to this report.