Noting the increasingly dire economy, General Motors and Chrysler asked the federal government yesterday to lend them $14 billion above and beyond what they had previously sought, raising the possibility that the automakers could continue to seek federal bailout aid for years to come.
In viability plans submitted late yesterday to the Treasury Department, the automakers outlined a series of cost-saving cuts and structural overhauls they hoped to enact but hinged their success on gaining access to considerably larger amounts of taxpayer-funded bailout loans.
To stay afloat in the face of steep sales declines, GM said it would cut an additional 47,000 jobs this year, close five more U.S. factories, halve its vehicle brands in the United States and cut the number of models it sells by a quarter. Chrysler said it would eliminate 3,000 employees, cut production by 100,000 units and kill three models.
To accomplish that, GM said it would need up to $30 billion in loans by 2011, including the $13.4 billion it has received, and opened the possibility to requesting further aid through 2014. The world's largest automaker said it could run out of money by March without new funds. Chrysler said it would need $9 billion in U.S. aid, including $4 billion it received in early January.
News of the Detroit companies' requests came on the day that President Barack Obama signed into law the $787 billion economic stimulus package. Worries that the legislation would not be sufficient to turn around the ailing U.S. economy contributed in part to a 298-point decline of the Dow industrial average, leaving it less than a point above the five-year low it set in November.
The automakers submitted the plans under terms of the original loan agreements in December. Top Obama economic advisers will begin reviewing the plans this week and will determine by March 31 whether they would ensure the car companies' long-term viability.
If not, Obama could require immediate repayment of the $17.4 billion, almost certainly triggering bankruptcy for both companies.
"It is clear that ... 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 press secretary Robert Gibbs said last night.
