GM plans deep cuts to obtain federal aid
WASHINGTON — General Motors Corp. will take a hacksaw to itself as part of a plea to Congress for part of $25 billion in aid, pledging billions of dollars in cuts across its North American business from reworking its debt to shedding up to four U. S. brands.
The plan will include several steps, such as lower executive pay, renegotiated debt payments, elimination of up to four brands and new concessions from the United Auto Workers, according to people familiar with the plan. While GM could make many such cuts on its own, renegotiating contracts with the UAW, bondholders and dealers could take months.
While Congress will begin scrutinizing plans from GM, Ford Motor Co. and Chrysler LLC this week, lawmakers facing deep divides over paying for aid may offer a temporary fix, giving Detroit automakers just enough cash to get through February and prove they can negotiate the cuts they have promised.
Such a deal also would allow the Obama administration to take a larger hand in crafting the aid plan, reshuffling the priorities automakers will present this week. Some key Democrats al-
ready are calling on Detroit to make political sacrifices part of its plan — such as dropping opposition to state rules on greenhouse gases from vehicles.
The short-term idea that some Democrats are considering would approve just enough in loans for the automakers to get through February. The enlarged Democratic majority in Congress and the Obama administration then would seek proof that the automakers were making progress on their business plans before delivering additional help.
The chief executives are expected to present their case Thursday to the Senate Banking, Housing and Urban Affairs Committee and Friday to the House Financial Services Committee.
GM is studying eliminating brands, with Pontiac and Saab joining Hummer as targets, the Detroit Free Press has reported. Bloomberg reported that Saturn also could be eliminated.
GM already has pledged to make $20 billion in cost cuts through next year, although $5 billion of those rely on selling assets such as the Hummer brand or borrowing money, neither of which GM can count on in the near future.
The Free Press has reported that the UAW is considering eliminating the jobs bank and making other concessions to help automakers make their case. The jobs bank, which pays workers for up to two years after a plant closes, has drawn severe scrutiny from lawmakers, even as the UAW contends it has been scaled back.
UAW Vice President General Holiefield said that eliminating the jobs bank might require a vote by members. Other changes, such as cuts in retiree health care and pensions, could require not just a membership vote but a court settlement.
GM long has been criticized for maintaining eight brands as its market share shrinks. But executives have been loath to shed any following the shuttering of Oldsmobile in 2001, which cost about $2 billion.
While automakers have signaled their willingness to make several concessions for aid, including limits on executive pay, lawmakers may take this week’s hearings as an opportunity to add to the list.
Sen. Dianne Feinstein, D-Calif., suggested several new strings last week, including requiring debt holders to accept reductions as part of the government loan, as Congress did with the $1.5 billion Chrysler bailout in 1979.
Feinstein also said automakers should be barred from using the loan money for lobbying Congress or fighting California’s greenhouse gas standards on vehicles, which Detroit and foreign automakers oppose as too stringent and unworkable.
The automakers’ chief executive officers will likely have a tough sell this week if House Majority Whip Jim Clyburn’s sentiments on a bailout are any indication.
“If I had my way, all three of those guys would be in the unemployment line, and I think that ought to be one of the conditions for us doing this,” Clyburn, D-S. C., told reporters.
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