Embattled American Automakers Share Their Survival Strategies
Tuesday, December 02, 2008SUSIE GHARIB: Detroit's big three auto makers today submitted to Congress their new roadmaps for survival, asking for $34 billion in government loans. The CEOs of General Motors, Ford and Chrysler are making their second proposal after their initial pitch two weeks ago failed to convince lawmakers to loan them money. This time, they are leaving their much criticized corporate jets at home and driving to the nation's capital in hybrid vehicles. The three CEOs are also promising to cut their multi-million dollar salaries to just a dollar a year each. As Washington bureau chief Darren Gersh explains, the auto makers are taking different routes to financing their future.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Late this afternoon, GM upped the amount of money it wants from Congress. The 37-page restructuring plan calls for a $12 billion loan, with $4 billion of that available immediately. On top of that, GM wants a $6 billion line of credit for use if sales fall more than expected. GM CEO Rick Wagoner detailed the plan on a conference call this evening.
VOICE OF RICK WAGONER, CHAIRMAN & CEO, GM: This plan has significantly more expansive actions built around a view that we need to structure the business to be profitable.
GERSH: After the auto makers filed their new pleas for Federal help, House Speaker Nancy Pelosi ruled out an industry bankruptcy filing, signaling Washington would come up with the money.
REP. NANCY PELOSI, HOUSE SPEAKER: Either their plan will be one that we will act upon or we will say, this is how we want you to restructure and that will be the legislation.
GERSH: GM also told Congress it hopes to negotiate a deal with lenders that might give them stock options in place of GM debt. Standard & Poor's analyst Robert Shulz says that would still have an impact on what was once upon a time, GM's sterling credit rating.
ROBERT SCHULZ, AUTO ANALYST, STANDARD & POOR'S: It's not a legal default; it's not a bankruptcy, but on those particular issues, we would view the company as having not paid what they said they were going to pay originally. So we would consider that a default from a ratings standpoint on those issues.
GERSH: Ford, the healthiest of the big three, is asking for a $9 billion standby loan that it did not expect to tap. Chrysler says it needs $7 billion. Michigan Congressman Sander Levin says the industry has given Congress the detailed survival plans it demanded. With other countries considering bailouts for their manufacturers, Levin says Congress can't let the American auto industry fail.
REP. SANDER LEVIN, (D) MICHIGAN: Can we rely on all of the production of this country to go over to transplants? We lose the technology; we lose the innovation; we lose the nerve center; we lose the design capability.
GERSH: The auto makers and Congress are engaged in what industry critic Peter Morici calls a delicate dance. On one side is Congress, demanding the companies make tough choices. On the other side is the negotiation between the auto workers union and company executives.
PETER MORICI, PROFESSOR OF BUSINESS, UNIVERSITY OF MARYLAND: They will be looking for a signal from Congress that its amenable, so they can then turn to the union and say, if you give us these concessions, the cash will be forthcoming and we can continue. If you don't, we're likely facing Chapter 11. And that scenario is much more dire for the unions.
GERSH: The UAW will be considering its options at a board meeting in Detroit tomorrow. One likely give-back: ending the much-criticized job bank that pays workers months after they've been laid off. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
