GM, Chrysler to get $7 billion in bailout cash without confirmed survival plans

February 17, 2009

(ChattahBox) — A White House official said the U.S. government will release $4 billion in additional aid to General Motors Corp. and $3 billion to Chrysler LLC on Tuesday as planned.

Both GM and Chrysler LLC will pick up the second installment of their loans Tuesday February 17th, ahead of the deadline for the automakers to submit new survival plans.

President Obama on Sunday created a high-level task force to oversee the restructuring of the automakers, which are facing a 26-year low in auto sales amid the world economic recession.

At the same time he two automakers’ restructuring plans, will also be submitted Tuesday, to the Treasury Department for review . The plans are supposed to outline how they intend to again become viable and repay the government loans.

GM was making progress Monday in concession talks with debtholders and its main union, but deals may not come until after the deadline passes, people briefed on the situation told The Associated Press.

GM executives have said the company only has to show substantial progress by Tuesday, with the whole plan finalized by March 31.

GM’s plan will discuss cost savings from labor concessions and additional plant closures, but the locations of those plants will not be revealed yet according to sources. The plan will also reportedly include more information about how GM will cut some of its eight brands, although nothing will be finalized. The company already has said Saab and Hummer are up for sale and Saturn is under review, leaving GM to focus on Chevrolet, Cadillac, GMC and Buick, with Pontiac reduced to one or two models.

Chrysler slashed 4,300 salaried positions in December through retirements and buyouts while GM is cutting 10,000 salaried jobs, including 3,400 in the United States. GM is also offering buyouts for 22,000 hourly workers. Some of GM’s buyout packages include $25,000 for new GM cars.

GM and Chrysler have also ended their so-called job banks, which allowed laid-off workers to retain most of their salaries until they were offered new auto jobs.

GM also immediately complied with the government requirement that the company limit executive pay by slashing the salary of its CEO, Rick Wagoner, to $1. (Chrysler CEO Robert Nardelli has been receiving a $1 salary since joining the company in 2007.)

GM and Chrysler have also ended their so-called job banks, which allowed laid-off workers to retain most of their salaries until they were offered new auto jobs.

In the case of the automakers’ debts, bondholders would have to agree to accept company stock in place of debt payments. In case of the UAW retiree health care program, the union would have to agree to accept half-stock, half-cash payments instead of all-cash payments to fund the program. Both are major stumbling blocks as concern about the depreciation of auto stock is weighing heavily.


Comments

One Response to “GM, Chrysler to get $7 billion in bailout cash without confirmed survival plans”

  1. Raquel on February 17th, 2009 11:50 am

    I hope this helps

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