By Don Miller
Associate Editor
Money Morning
The Obama administration said yesterday (Tuesday) that it will provide General Motors Corp. (GM) and Chrysler LLC an additional $5.5 billion in working capital from the Troubled Asset Relief Program (TARP) as the companies face government deadlines to restructure or lose federal support.
Chrysler will have access to about $500 million through the end of this month as it seeks to reach an alliance with Fiat S.p.A. (ADR: FIATY) before a government-imposed May 1 deadline. GM can draw up to $5 billion in assistance through the end of May as it struggles to restructure outside of bankruptcy court, TARP's special inspector general said in an independent oversight report.
GM Chief Executive Officer Fritz Henderson said last week that his company will probably need $4.6 billion in additional funding this quarter. The company is currently negotiating deals with unions and bondholders, hoping to reduce its level of debt and cut expenditures on jobs and operations enough to avoid a possible court-supervised restructuring, Bloomberg reported.
GM is planning to cut 10,000 salaried workers and 37,000 hourly workers from its global workforce by the end of the year. The company said Monday that it would slash 1,600 white-collar jobs in just the next few days.
Henderson said last week that GM would close more factories in addition to the five closings it announced in February. Which factories will be closed has not yet been determined.
"There is no question, as we look at our revised plan to go deeper and go faster in our operational restructuring, there will be further reductions in manpower, people, that are going to affect communities, affect plants and people, both on hourly and the salaried side of the business," Henderson told reporters.
The administration's auto task force has said Chrysler can't survive by itself and is conducting meetings this week in Washington and Detroit to determine if an alliance with Fiat is feasible.
The alliance would give Chrysler access to Fiat's small car technology, while the Italian automaker would gain a platform for building light trucks and a nationwide network for selling its vehicles in the United States. The government will help finance the alliance with up to $6 billion.
Analysts are skeptical the companies will be able to complete a deal and avoid a Chrysler bankruptcy.
In a press briefing at the White House on Monday, Obama's chief spokesman, Robert Gibbs, refused to disclose details of any talks with the automakers, but said the administration is working "with all of the stakeholders involved" towards a solution that will "continue the Chrysler brand" and strengthen the automobile industry overall.
"The President continues to be involved in this issue and understanding the tremendous economic importance both for the overall industry and for the dozens of communities throughout the country that are dependent upon Chrysler and auto parts suppliers that supply Chrysler for good-paying jobs," Gibbs said.
Meanwhile, the United Auto Workers (UAW) union encouraged members to contact the White House to make sure that workers and retirees are treated fairly in negotiations at both companies on new concessions, which the automakers' must have to survive.
"We need President Obama and his auto task force to stand up for the interests of workers and retirees in these restructuring negotiations," the union said in an appeal on its Web site to members, Reuters reported.
The UAW represents about 26,000 workers at Chrysler and 62,000 at GM.
News and Related Story Links:
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Bloomberg:
GM Gains as U.S. Agrees to $5 Billion in New Aid -
Reuters:
U.S. to give Chrysler, GM new aid