Big Three look to avoid bankruptcy

Dec. 4, 2008
The Big Three U.S. carmakers — Ford, General Motors and Chrysler — returned to Capitol Hill today to ask for a total of $34 billion in federal loans after submitting sustainability plans that detail how they plan to return to profitability

The Big Three U.S. carmakers — Ford, General Motors and Chrysler — returned to Capitol Hill today to ask for a total of $34 billion in federal loans after submitting sustainability plans that detail how they plan to return to profitability.

Of the three, General Motors appears to be in the most dire straits. GM CEO Rick Wagoner has asked for $18 billion in loans, saying the company needs $4 billion by the end of the year and $12 billion overall to provide adequate liquidity levels to avoid bankruptcy. GM is also requesting an additional $6 billion line of credit “to provide liquidity should a severe market downturn persist,” to be repaid beginning in 2011.

According to GM, the company’s blueprint for sustainability includes increased production and funding of fuel-efficient vehicles, reduced wage and benefit costs, capital structure restructuring, and continuing consolidation of manufacturing operations.

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Ford is asking for $9 billion, but said it hopes to “complete its transformation without accessing the loan should Congress agree to make the funds available.” The company said it expects both its overall and its North American Automotive business pre-tax results to break even or be profitable by 2011.

“For Ford, government loans would serve as a critical backstop or safeguard against worsening conditions, as we drive transformational change in our company,” said Ford president & CEO Alan Mulally.

“…We are aware that our domestic competitors are, by their own reporting, at risk of running out of cash in a matter of weeks or months,” Ford said in their sustainability plan. “Because our industry is an interdependent one, with broad overlap in supplier and dealer networks, the collapse of one or both of our domestic competitors would threaten Ford as well. It is in our own self-interest, as well as the nation’s, to seek support for the industry at a time of great peril to this important manufacturing sector of our economy.”

Chrysler, asking for $7 billion in loans, urges “the immediate adoption of legislation that will allow domestic automakers to weather the current national economic crisis and continue to invest in industry-leading products, technologies and vehicles of the future,” said CEO Robert Nardelli. “Without an immediate working capital bridge, Chrysler’s liquidity could fall below the level appropriate to ensure operations in the ordinary course by the first quarter of 2009.”

Nardelli added that Chrysler is planning to launch 24 new vehicles through 2012, with 73% of the products to be launched in the 2009 model year featuring improved fuel economy compared to 2008 models. He said Chrysler should be positioned to begin repaying the loan in 2012.

All three automakers are promising the further development of electric vehicles and hybrids. General Motors is planning to begin production of the Chevy Volt, which can travel up to 40 miles solely on electricity, in 2010. The company added that it will invest approximately $2.9 billion in alternative fuels and advanced propulsion technologies between 2009 and 2012, offering 15 hybrid vehicles by 2012.

Ford said it will invest approximately $14 billion in advanced technologies and products aimed at improving fuel efficiency in the next seven years, saying half of its Ford, Lincoln and Mercury light-duty nameplates should qualify as “Advanced Technology Vehicles” by 2010 and 90% by 2014. The company added that it will bring a family of hybrids, plug-in hybrids and battery electric vehicles to the market by 2012, beginning with a full battery electric vehicle (BEV) in a “van-type” vehicle for commercial fleet use in 2010.

Chrysler said its ENVI all-electric and range-extended electric vehicle line will include the introduction of the Dodge Ram Hybrid and the company’s first electric-drive vehicle in 2010 with three additional models available by 2013.

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Justin Carretta

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