Stricken big 3 unveils plans
3 American automakers unveiled plans to revamp as they begged Congress for loans. -ST
Wed, Dec 03, 2008
The Straits Times
CHICAGO, USA - The big three American automakers on Tuesday unveiled plans to restructure and revamp their companies as they begged Congress for billions of dollars in loans to save them from collapse.
Ahead of scheduled congressional hearings on Thursday and Friday, Ford, Chrysler and General Motors all put forward proposals to trim some fat and revitalize their companies to face economic challenges ahead.
Ford Motor Co presented Congress with a major reorganisation plan and said it would break even or restore profitability in 2011 if lawmakers approve up to nine billion dollars in emergency financing.
General Motors asked for an 18-billion-dollar (S$25.7 billion) bailout, vowing to pay back 12 billion by 2012 and to review its Saab and Saturn labels to focus on core brands. In addition it will shed some 31,500 jobs.
Chrysler told lawmakers it needs a seven billion dollar loan by year-end to survive a perfect storm of a global credit crisis, falling demand for large vehicles and a worldwide economic slump.
US lawmakers set a Tuesday deadline for the key industry chiefs to come up with a plan, after they went cap-in-hand to Congress saying they urgently needed 25 billion dollars (S$37.8 billion) to avert a collapse of the sector.
Such a collapse could throw millions more workers out of jobs, especially in those industries reliant on the auto sector.
Ford said its plan calls for cost savings with unionized workers and an investment of 14 billion dollars over the next seven years to improve fuel efficiency through the development of new technologies and products.
If the plan gets congressional help, chief executive Alan Mulally would work for a salary of one dollar a year 'as a sign of his confidence in the company's transformation plan and future'.
And the struggling Detroit giant added that it would also sell its five corporate jets.
'Ford is asking for access to up to nine billion dollars in bridge financing, but reiterated that it hopes to complete its transformation without accessing the loan should Congress agree to make the funds available,' the number-two automaker said in a statement.
It added that, unlike GM and Chrysler, it does not anticipate it will run out of cash next year, but needs access to the loan in case the economy worsens.
'We appreciate the valid concerns raised by Congress about the future viability of the industry,' Mr Mulally said, as Ford shares closed up 5.9% at 2.70 dollars.
'We hope that our submission today helps instill confidence in Ford's commitment to change, including our accountability and shared sacrifice during this difficult economic period.'
General Motors, which has warned it would run out of cash as early as January, said it will focus its product development and marketing efforts in the United States on four core brands - Chevrolet, Cadillac, Buick and GMC.
The automaker said it would need 12 billion dollars to cover operating costs through the end of 2009 and also requested a revolving credit line of six billion dollars to 'provide liquidity should a severe market downturn persist'.
The automaker vowed to repay the 12-billion dollar loan by 2012 should overall US auto sales remain at or above 12 million vehicles a year.
It said it planned to reduce its total US employment to 65,000-75,000 salaried and unionised workers by 2012 from their current level of 96,537, and it will slash its US plants to 38 in 2012 from 47 in 2008.
Chrysler, the smallest of the Big Three Detroit automakers, said it will have an estimated 2.5 billion dollars in cash on hand by December 31 after a 'significant downturn' of the US automotive sector in the second half of the year.
'Without an immediate working capital bridge, Chrysler's liquidity could fall below the level necessary to sustain the company through the first quarter of 2009,' the company said.
Chrysler said it needs a seven billion dollar loan by year-end to survive the current crisis.
Looking to future energy needs, Ford said it will accelerate the introduction of gas-electric hybrid and fully electric vehicles, including plans to bring an electric van-type commercial vehicle to market in 2010 and an electric sedan to market in 2011.
It will also improve the fuel economy of its total fleet of vehicles by 36% for 2015 models. -- AFP
| Auto sector feels more pain WASHINGTON - PAIN from the credit crisis intensified in the auto sector on Tuesday on news of calamitous sales drops in the US and Brazil, while EU finance ministers gave lukewarm backing to fresh stimulus plans. Embattled US automaker General Motors reported a 41% drop in November domestic sales as it prepared to return to Washington to press lawmakers for a multibillion-dollar bailout. The automaker blamed the global economic crisis and credit freeze for its poor results and estimated that total demand for all brands in the US market fell by more than 34% in November. GM said US auto sales are now at their lowest rate in at least 50 years on a per capita basis. 'Every manufacturer is posting awful numbers and we are no exception,' said Mr Mark LaNeve, vice-president of North America vehicle sales, service and marketing. The research firm Autodata said US sales were down 36.7% from a year ago and at the lowest level since 1982. Ford Motor Co. reported a 31% drop and Chrysler said US sales plunged 47%. The Big Three submitted plans to Congress for their survival and requests for emergency aid. GM said it needs up to 18 billion dollars (S$27.5 billion), while Ford requested as much as nine billion and Chrysler asked for seven billion in loans. House of Representatives speaker Nancy Pelosi said on Monday that bankruptcy for US automakers 'is not an option' and that a short-term loan program 'is an appropriate way to go'. 'I believe an intervention will happen, either from the administration or legislatively,' she said. 'I think it's pretty clear that bankruptcy is not an option. It takes too long. What bankruptcy achieves in a year we can do in a matter of weeks, that's why the short-term loan is an appropriate way to go.' Problems emerged in Brazil after two years of fast-paced growth for the auto sector. New car registrations in November fell 30% compared with the same month in 2007, the national car dealers federation Fenabrave said. At the same time, according to the Folha de Sao Paulo daily, 47,000 auto workers - nearly half the total 113,000 in the country - have been put on mandatory vacation by companies, which have cut monthly production by more than 60% as stocks of unsold vehicles pile up. In Brussels, finance ministers from all 27 European Union countries met to discuss proposals by the European Commission for a stimulus plan totaling 200 billion euros, equivalent to 1.5% of EU gross domestic product. Luxembourg's Jean-Claude Juncker, who serves as both prime minister and finance chief, insisted that the figure, disputed by eurozone ministers on Monday, was less important than that 'everyone agrees with the general direction'. But differences were evident. Germany is taking a more cautious line than France and Britain. The ministers said in a document agreed at the meeting that they only 'in principle' welcomed the European Commission's proposed stimulus package. Elsewhere, renewed gloom about the depth and length of the downturn pulled the price of oil below 46 dollars a barrel in London, the lowest level for nearly four years. There were also worrying signs that the powerhouse Chinese economy is slowing dramatically. The yuan fell by its maximum daily trading limit for a second consecutive day on Tuesday. The sudden drop in the value of the Chinese currency may signal a policy shift to prop up exports during the financial crisis, analysts said. 'I have never before seen a financial system that has been in pain for so long,' said Mr Chuo Mitsui Trust Bank strategist Yosuke Hosokawa. 'Markets are wondering whether the negative situation will deepen further'. Elsewhere, the Latvian government said it may raise its stake in Parex, the nation's second-largest bank which is already being taken into state hands, as authorities slapped restrictions on cash withdrawals. In Russia, Prime Minister Vladimir Putin pledged 10.5 billion rubles (S$546.2 billion) in support for small businesses to help them through the economic crisis. After brutal losses in the US and European stock markets on Monday, Asian bourses suffered a similar fate but most other markets rebounded. The Dow Jones Industrial Average rallied 270.00 points (3.31 per cent) to close at 8,419.09, coming off a horrific 679-point loss on Monday. The Nasdaq composite climbed 3.70% to 1,449.80 and the Standard & Poor's 500 added 3.99% to 848.81, after both fell more than eight percent on Monday. In London, the FTSE 100 index of leading shares closed 1.41% higher. The Paris CAC 40 gained 2.35% and in Frankfurt the DAX jumped 3.12 %. Mr John Wilson, equity strategist at Morgan Keegan, said the stock market may be able to sustain a rally even with the economy mired in recession. 'The market will begin to look through the trough well before we or the economists see it, so the fact that we are in a recession doesn't preclude the stock market forming a major low in here,' he said in a note to clients. Earlier, Tokyo plunged 6.35% and Hong Kong by 5.0%. -- AFP |
This article was first published in The Straits Times on Dec 3, 2008.
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