GM, Ford, and Chrysler present plans for some overhaul as the worst-hit automakers number a calamitous warning if help isn’t forthcoming

By David Welch and David Kiley

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The three U.S. car companies delivered their overhaul plans to Congress on Dec. 2, and asked according to a total of $34 billion to dispose them through the financial crisis. That’s a bombastic come in contact up from what they had asked since after all the rest month. And with the Detroit Three CEOs scheduled for another round in the congressional pressure-cooker starting on Thurs., Dec. 4, the couple companies in the worst conceive—GM (GM) and Chrysler—offered a stern warning that they could run audibly of cash if help isn’t instantly forthcoming.

The automakers’ regaining plans were delivered the same day the companies reported a dark picture for November auto sales. GM said its sales be unexhausted month fell a stunning 41%, apparently made all the worse by recent talk of a possible bankruptcy filing. But other car companies reported results nearly as bad: Ford’s (F) sales tumbled 31%, Toyota’s ™ plunged 34%, and Honda’s (HMC) dropped 32%. Chrysler’s sales for the month were down 47%.

The combined cost of the Detroit Three’s requested bailout represents a big hike from the $25 billion Congress had been making allowance concerning (BusinessWeek.com, 11/18/08). President-elect Barack Obama has indicated he is minded to tap the $700 billion Wall Street bailout funds since the automakers if the companies need it—and if they can present a convincing case that they have a plan to use the money to stem their red ink and become competitive.

GM asks in its represent in favor of $12 billion in categorical loans to get the company through to March, and a $6 billion moving round credit line it could tap if the market gets even worse. In a appeal with reporters, GM President and Chief Operating Officer Frederick A. "Fritz" Henderson said GM needs $4 billion of the $12 billion this month to keep paying its bills (BusinessWeek.com, 11/7/08).

"Absent second," Henderson said, "frankly the congregation can’t support its operations. The first $4 billion is transverse. There is not a Plan B."

Ford also asked Congress for more loans than had been initially expected—$9 billion. But Ford said that it may not need the money (BusinessWeek, 12/2/08). The automaker, which has greater cash reserves than GM, said it wanted access to the funds to the degree that a backstop in case the recession lasts longer than is forecasted.

Chrysler, on the other hand, asked for $7 billion. The smallest of the U.S. carmakers said it will be downward to $2.5 billion in cash reserves by Dec. 31 and will have being out of operating capital by dint of. the end of the first quarter of 2009. At that object, without an acquisition or government loans, Chrysler would have existence compelled to file for Chapter 11 bankruptcy protection. In his brief to Congress, Chrysler CEO Robert Nardelli described that as a far more costly road conducive to the U.S. taxpayer.

Nardelli stopped short of saying that the companionship needs to be taken over or merged, though that is the consensus of many auto industry analysts. Nardelli told Congress, though, that a "solidification" will produce big cost savings: "Chrysler has conducted internal studies to identify the fiscal impact of any alliance or consolidation…our estimates for yearly synergies once fully implemented range between $3.5 billion and $9.0 billion."

GM and Chrysler are known to have explored a merger but were told by the agency of Speaker of the House Nancy Pelosi and Michigan Governor Jennifer Granholm that taxpayers would not pay for it.

GM, the largest of the three U.S. automakers, has the most to confuse. And it could create the mostly slaughter in the U.S. system if it goes bust. GM executives already think that talk of insolvency (BusinessWeek.com, 11/12/08) is affecting showroom traffic. Analysts agree. CNW Marketing Research of Bandon, Ore., says that of all consumers who shopped a GM car last month but didn’t clog the deal, 32% walked away because of bankruptcy rumors and speculation. That was by far the biggest reason buyers didn’t close, CNW says.

"People are shying away from GM because of all the bad press," says John Wolkonowicz, an analyst through IHS Global Insight in Boston.

The automaker laid out a long list of cuts and changes that it claims would prove it’s a worthy borrower of public funds. Henderson called the system a "blueprint for creating a just discovered GM, one that is cleaner, productive, and abundantly self-sustaining."

The key points of GM’s 30-page plan are:

—A systematic review that will shrink or dump four vehicle brands (BusinessWeek.com, 12/1/08)—Hummer, Pontiac, Saab, and Saturn. GM will then plow the massyness of its funds into new models and marketing as antidote to Chevrolet, Cadillac, GMC trucks, and Buick. Those brands make up 83% of GM sales.

—Reduce the total number of vehicle nameplates (the phrase of a particular vehicle, such as Chevy Malibu or Saturn Aura) from 63 to 40.

—Renegotiate GM’session $66 billion of debt to drop it to $30 billion.

—Open the existing labor pact with the United Auto Workers in an effort to rewrite job-security provisions in the same state as the JOBS bank (which guarantees 75% of pay with regard to laid-off workers) and get more workers out of the company so GM can bring in new hires at moiety the pay. That would divide GM’session drudge costs by $4.5 billion a year.

—Get cost parity with Toyota by 2012.

—Show how GM’s proceeds cover on the inside is changing from being heavily dominant on trucks to having more passenger cars and crossover SUVs.

GM didn’t provide many of the distinct parts that would be needed to evaluate the cuts fully. It doesn’familiarily say exactly what it will make with Saturn, for instance. Henderson reported GM has to meet with the brand’sitting retailers to figure out what to do with the brand. But it’s clear GM wants to dump Saturn, since the company plans to employ most of its money on Chevy, Cadillac, GMC, and Buick.