GM CEO Rick Wagoner: Alms for the poor?
Chrysler and General Motors have submitted turnaround plans to the U.S. Department of Treasury that will determine the fates of ten of thousands of blue and white collar workers worldwide. Neither of the struggling companies will discuss details of their latest plans until late Tuesday after the stock market closes.
Stay tuned. TheDetroitBureau.com will have updates as the evening progresses and details emerge from GM and Chrysler.
Given the global economic collapse it is expected that cutbacks will be much more severe than contained in the plans originally submitted to Congress on December 2, 2008. Talks today are continuing with the United Autoworkers Union over health care benefits, but the Union said earlier that an agreement would take more time. It’s also not clear if the deals needed under the loan terms have been reached with bondholders to convert their debt into stock of the companies.
Robert Nardelli, Chairman and CEO, will discuss the plan at about 5 pm. General Motors Chairman and CEO Rick Wagoner will hold a news conference about 6:30 pm to discuss the viability plan being submitted to the U.S. Treasury and to provide an update on the company’s restructuring.
Responding to the Speaker of the House Nancy Pelosi’s letter that was released yesterday, Chrysler said in a statement, “We believe we are on track with our viability plan, which will be consistent with both the request of the letter and the terms of the loan agreement. We look forward to a continued dialogue with the Administration and Congress as we move forward with the process.”
Since 2007 Chrysler has taken out 1.2 million units of production capacity, stopped building four models and reduced the total work force by more than 32,000 employees. Annual fixed costs have been cut by more than $3 billion according to the Michigan-based maker. To raise cash Chrysler has so far sold assets valued at more than $700 million. Latest on the auction block is the Viper sports car business. No buyer has been announced.
General Motors has reduced annualized North American structural costs by $10B since 2005. GM told employees last week that it will reduce salaried employment globally from a current level of 73,000 to approximately 63,000 this year. GM also announced a pay reduction for a most U.S. salaried employees. This begins May 1, and will be effective through the end of the year, when it will be reviewed. In the U.S., executive employees will have their base pay reduced by 10 percent, and many other salaried employees will see reductions of 3 to 7 percent. Similar cuts are expected in 33 other countries. GM employs 244,500 people in every major region of the world, and sells and services vehicles in some 140 countries. More cuts are coming.
There’ve been mounting concerns about how the viability plans will be received, in Washington, with growing opposition from lawmakers who feel that the makers, Chrysler in particular, simply cannot survive, despite repeated assurances from Detroit. To put pressure on skeptics, GM estimates almost 4% of the Gross Domestic Product is auto-related. Three million U.S. jobs are dependent on the health of U.S. automakers, and they are not all in the Midwest.
Support is also coming, curiously enough, from Japanese industry circles. As TheDetroitBureau.com reported, last week, Toyota is deeply concerned about the impact of the potential collapse of one or more Big Three makers. While that might seem politically self-serving, there are reasons for the maker to be wary. There’s the possibility of a public backlash, once the impact on jobs and the economy were to become apparent. Equally significant, from Toyota’s view, is the devastating impact a bankruptcy could have on automotive suppliers, many of which Toyota shares with Detroit’s Big Three. As the dominoes were to fall, it could leave Japanese “transplants” struggling to replace supplies of critically-needed components or risk having their own, U.S. plants idled.