U.S. grants Detroit 3, suppliers millions for fuel savings, jobs

Detroit -- The Obama administration awarded $187 million in grants Monday to major automakers and suppliers to boost fuel efficiency.
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Massive Cuts at GM - shed 23,000 jobs, kill Pontiac brand

WASHINGTON – General Motors Corp. will cut an additional 7,000 to 8,000 factory jobs in the United States, kill the Pontiac brand and shed 2,600 dealers by 2010 under a revised business plan developed under the Obama administration's eye.

The plan, along with an offer to bondholders to exchange $27 billion in GM debt for about 10% of a reconstituted GM and a small amount of cash, makes clear that the automaker's fate over the next few weeks rests with President Barack Obama. His auto task force set the terms of the bond deal and the goal of having 90% of the debt exchanged, and the U.S. government would become GM's majority shareholder if the plan succeeds.


GM Chief Executive Officer Fritz Henderson warned today that should the exchange not meet the task force's target, GM would file for bankruptcy on or before June 1. To succeed, GM will need thousands of GM debtholders to agree -- from individuals to some of the largest investors in the world -- by May 26.


"It's not impossible, but it’s a tough task," Henderson said, adding: "If we were to materially fall short, we would fall into a bankruptcy process."


As part of the debt offer, GM said, the administration would consider converting 50% of its loans to the company into GM stock. Combined with a similar request to the UAW for converting half of the $20 billion owed to a retiree health-care trust to shares, the plan envisions the government owning at least 50% of a reconstituted GM and the union holding about 39%.


Obama's auto task force said in a statement today that GM’s offer was an “important step,” but noted that its concessions hinge on bondholders and the UAW agreeing as well.


“We will continue to work with GM's management as it refines and finalizes this plan and with all of GM's stakeholders to help GM restructure consistent with the president’s commitment to a strong, vibrant American auto industry,” the task force said.


The new plan Henderson unveiled would get GM to profits in a U.S. market of 10 million vehicles -- a far lower rate than GM imagined just a couple of months ago. Should the debt swap succeed, GM will cut its debt by $44 billion and its structural costs by 25% by 2010.

"The objective here is not to survive, the objective is to develop an operating plan that allows us to win," Henderson said.


The new job cuts bring the total number of hourly jobs eliminated under GM’s plan to 21,000 by 2010 and 23,000 by 2011. GM said additional cuts among salaried workers would be expected, but did not give a specific target. As it had indicated earlier this month, GM now plans to close 13 plants by 2010 and an additional five plants by 2012.

Henderson said the Pontiac brand would be closed by 2010, calling it an “extremely personal decision.” In addition to speeding up decisions on Saturn, Saab and Hummer, GM will be left with four brands – Chevrolet, Buick, GMC and Cadillac.


He said while talks continue on Saab and Hummer, there was no deal on the table yet for Saturn that would allow GM to keep building those models beyond this year.


GM said it now expects it will need $27 billion in total from the Treasury to withstand the recession, including the $15.4 billion it's already received. That includes $2.6 billion it will need this quarter and an additional $9 billion after that, some of which includes the cost of deeper job cuts and plant closings.

Henderson said dealers targeted for closing would begin hearing from GM in a matter of weeks. Dealers have been apprehensive about a GM bankruptcy, but it's not clear how quickly GM could close outlets given a bevy of state laws protecting dealers.

Through the cuts in brands and models, GM will shed 14 models through 2010, although the Chevrolet Volt electric car remains on track for a 2010 launch

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Chrysler plan seeks $2 billion more in federal aid, will cut 3,000 more jobs

Alisa Priddle / The Detroit News
Chrysler LLC wants an additional $2 billion in federal aid on top of the $4 billion received to date and the $3 billion it has requested but has not been granted.

In addition, the struggling Auburn Hills automaker also plans to cut its fixed costs by $700 million and eliminate another 3,000 jobs this year. The plan also would:

• Reduce one shift of manufacturing

Discontinue three vehicle models

• Take out 100,000 units of capacity

• Sell $300 million of additional non-earning assets

Chrysler said it also has suspended the 401(k) retirement plan match, as well as incentive bonuses, merit increases, and has retiree life-insurance benefits.

These are among the first details of the restructuring plan submitted to the government this evening in a document designed to show the automaker can become a sustainable, standalone company if it receives a total of $9 billion in bridge loans from the government.

And it can be even more profitable with a partnership with Fiat SpA, Chrysler said.

"We believe that Chrysler LLC will be viable based on the updated assumptions contained in this submission, and that 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," said Chrysler chairman Robert Nardelli.

But deteriorating market conditions and lack of credit, resulting in Chrysler sales falling 30 percent in 2008 and 55 percent in January, has forced Chrysler to revise its U.S. annual sales forecast to 10.1 million units for this year and 10.8 million units for 2009-2012.

For Chrysler it represents a sales decline of approximately 720,000 units, (or an average 180,000 units per year) assuming a 10 percent market share. That translates to about $18 billion in lost revenue and a $3.6 billion decline in cash inflows during the four years.

Hence, the request for an additional $2 billion.

The plan promises 24 vehicle launches in 48 months and pursuit of electric technology to develop fuel-efficient, low-emission vehicles, including an electric-drive vehicle in 2010. New products include new versions of the Jeep Grand Cherokee, Dodge Charger, Dodge Durango and Chrysler 300 next year.

The Dodge Durango and Chrysler Aspen will not resume production and Chrysler PT Cruiser will be discontinued this summer. Those three nameplates join the already announced eliminations of the PT Cruiser convertible, Dodge Magnum, Chrysler Crossfire and Chrysler Pacifica. ...More

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GM News:GM cutting 2,000 jobs in Michigan, Ohio

Article from The Detroit News

NEW ORLEANS -- General Motors Corp. announced more production cuts and layoffs today because of weak demand affecting the U.S. auto industry.

The automaker is eliminating a shift at its Delta Township plant near Lansing and in Lordstown, Ohio, collectively affecting about 2,000 workers. It will temporarily idle production at 10 other plants across North America during the first or second quarter, GM spokesman Chris Lee said.

At GM's Delta Township plant near Lansing, about 1,200 workers will be laid off indefinitely March 30 after the automaker eliminates one shift. Workers, who produce the Buick Enclave, GMC Acadia and Saturn Outlook, will alternate on two shifts from Feb. 2 to March 27 before a shift is eliminated....More

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