Gordon Trowbridge / Detroit News Washington Bureau
WASHINGTON -- A top White House adviser on Sunday refused to rule out bankruptcy for General Motors Corp. as the deadline for GM and Chrysler LLC to submit restructuring plans to the government looms this week.
"We're going to need a restructuring of these companies," said David Axelrod, a senior adviser to President Obama, said on NBC's "Meet the Press." "How that restructuring comes about is going to have to be determined."
Meanwhile, GM and the United Auto Workers union are expected to resume negotiations Sunday afternoon on concessions as part of the automaker's restructuring plan.
The plan is a condition of the $13.4 billion federal loan package GM received in December and must outline how the company will return to competitiveness. The government has the option of recalling the loans and essentially forcing a bankruptcy by the end of March if Obama administration officials do not believe the company is making adequate progress. GM has already received $9.4 billion and is set to get the remaining $4 billion on Tuesday.
GM's board of directors will meet by teleconference on the President's Day holiday Monday to review the company's restructuring plan before it is submitted to the U.S. Treasury Department, GM spokesman Steve Harris said on Sunday.
The Detroit automaker's board has been meeting by phone three days a week recently to review the constantly evolving plan.
"It's just a last chance to explain things before it's submitted on the 17th," Harris said.
GM's plan is to outline more significant cost-cutting, including more plant closings, job cuts and expected sacrifices from bondholders and the UAW. GM told Congress in December it planned to cut at least 31,000 jobs and close 9 plants by 2012. The updated plan will outline a more detailed schedule of cuts, but GM isn't expected to announce any final agreements with bondholders or the UAW.
Negotiations between the UAW and GM are expected to resume Sunday afternoon, a source familiar with the situation said. The talks broke down late Friday after the UAW strongly objected to proposals that went beyond what the Treasury Department required in the loan terms over the amount of money GM will pay the union to fund a retiree health-care trust.
The loan terms target paying half of what's owed in cash and the other half in company stock. GM and the UAW agreed to shift responsibility for retiree health care to the union beginning in 2010 as part of a new contract negotiated in 2007.
Last week, GM announced it would cut another 10,000 salaried workers worldwide and institute temporary pay cuts of up to 10 percent for salaried employees.
Chrysler also will file a restructuring plan with the Treasury Department on Tuesday as part of its deal to receive $4 billion in emergency loans. Chrysler says it needs another $3 billion to survive beyond March 31, but has not yet won Treasury Department approval for the additional funds.
Axelrod's comments Sunday continued a pattern by the Obama administration of refusing to address the bankruptcy question directly, either to embrace it or to rule it out. In a roundtable discussion with The Detroit News and other regional newspapers last week, Obama also did not directly address bankruptcy.
Michigan lawmakers have forcefully opposed bankruptcy, saying the companies would be unlikely to emerge from bankruptcy because car buyers would refuse to consider products from a bankrupt company. Any bankruptcy would almost certainly still involve a massive federal financial commitment, because private capital markets are unlikely to provide the financing that would be necessary.
"We need an auto industry in this country," Axelrod said Sunday. "We have an interest in seeing the auto industry survive. But it's going to take a real restructuring."
Axelrod's comments came in response to questions about a Wall Street Journal report on Saturday that GM will offer two options when it files its federal restructuring plan on Tuesday: A continued infusion of federal aid to keep the company in business, or a government-financed bankruptcy. GM has declined to comment on the Journal's report.
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