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Thu, Feb 19, 2009 - Page 10 News List

GM, Chrysler ask for more US loans

US$21.6 BILLION MORE The chairmen of the two firms said the additional loans would be a less costly alternative to the cost of restructuring through bankruptcy

AFP , WASHINGTON

General Motors Corvette assembly plant worker Scott Campbell puts the finishing touches on a Corvette at the Bowling Green, Kentucky, plant on Dec. 12.

PHOTO: AP

General Motors (GM) and Chrysler went cap-in-hand to the US government on Tuesday, calling for US$21.6 billion in additional US government loans to stave off bankruptcy and win extra time for restructuring.

Both companies insisted they would be able to repay the loans as they presented long-term viability plans to the US Treasury, one of the conditions of a US$17.4 billion government bailout approved in December.

“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 going forward,” White House spokesman Robert Gibbs said in a statement.

General Motors said it would be cutting 47,000 jobs worldwide, closing plants, killing brands, slashing production and revamping its product offerings in order to return to “sustainable profitability in 24 months.”

“These are the kind of actions we need to take to survive the current industry crisis and position GM for sustainability and success,” GM chairman and CEO Rick Wagoner said.

The largest US automaker said it could require a further US$16.6 billion in US government loans by 2011 in addition to the US$13.4 billion approved in December. Its plan also depends upon receiving US$6 billion in funding support from the governments of Canada, Germany, the UK, Sweden, and Thailand “to provide liquidity specifically for GM’s operations in these countries,” GM said.

GM warned that the cost of doing nothing would be even higher: It estimated the cost of restructuring through bankruptcy at US$100 billion and said up to 3 million US jobs could be lost if it were to fail.

Chrysler, meanwhile, called for an additional US$5 billion from the US government bailout loan program, as the industry, one of the key pillars of the US economy, reshapes in the wake of a global collapse in auto sales.

“We believe the requested working capital loan is the least-costly alternative and will help provide an important stimulus to the US economy and deliver positive results for American taxpayers,” Chrysler chairman Bob Nardelli said.

“An orderly restructuring outside of bankruptcy, together with the completion of our standalone viability plan, enhanced by a strategic alliance with Fiat, is the best option,” he said.

Chrysler said it planned to discontinue three vehicle models, cut production by 100,000 vehicles a year, eliminate 3,000 jobs and reduce fixed costs by US$700 million.

Earlier, the Detroit Three automakers, which also includes Ford, reached a “tentative” agreement with the United Auto Workers union to help reduce labor costs.

The union said the deal would allow the Detroit automakers to modify their 2007 labor contracts but did not provide any details.

“The changes will help these companies face the extraordinarily difficult economic climate in which they operate,” union president Ron Gettelfinger said in a statement.

Administration officials are expected to study the auto industry plans for several weeks before deciding a course of action.

The final plan will serve as a basis for the Treasury’s decision, due by March 31, on whether to extend the loans or call them in and comply with some requests to allow the companies to collapse.

But Chrysler’s request for additional funds could be hampered by its recently announced alliance with Italy’s Fiat, though it insists no US taxpayer funds would go to Fiat.

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