General Motors Corp and Chrysler LLC requested nearly $22 billion in additional US government loans and said they had reached tentative deals with the United Auto Workers union to reduce labor costs.
The two automakers,which have so far received $17.4 billion in loans from the US Treasury,also detailed plans to cut jobs and idle plants as part of sweeping restructuring plans submitted under the terms of their federal bailout.
GM said it was making progress on complex deals to reduce some $48 billion in debt owed to bondholders and the United Auto Workers union but had fallen short of an initial requirement to complete those agreements by Tuesday’s deadline for submitting the plans to US officials.
“The president’s team will be reviewing these reports closely in the days ahead,” White House spokesman Robert Gibbs said in a statement. “It is clear that going forward,more will be required from everyone involved.”
GM is seeking an additional $16.6 billion from the US Treasury — for a total of up to $30 billion in loans — and said it would run out of cash as soon as March without new federal funding.
In addition,GM said it expected to be able to borrow up to $6 billion from foreign governments and nearly $8 billion from the US Department of Energy. It warned that without $1.5 billion from asset sales in 2009 it would need even more cash.
The deepening financial problems for GM and Chrysler present the Obama administration with a tough call.
Pushing the companies into bankruptcy would cost tens of thousands of jobs just as the White House is aiming to head off a deeper recession. But the price tag for saving GM and Chrysler has now ballooned to $39 billion at a time when Republicans are challenging plans for stepped-up spending and increased debt.
Rep. John Dingell,a Michigan Democrat and staunch industry ally,said government “must do whatever is possible” to preserve the US auto industry.
“The cost of action will be high,but the cost of inaction will be higher,” Dingell said in a statement.
Others questioned the soundness of further government support for GM and Chrysler.
“I think this is a perilous road,” said Alan Lancz,president of investment firm Alan B Lancz & Associates Inc. “This is a situation where we really have to decide whether we are throwing good money after bad.”
At the request of the Obama administration,GM and Chrysler prepared projections claiming the cost to the government of financing a bankruptcy of both could near $125 billion.
Chrysler CEO Bob Nardelli said the automaker’s request for $9 billion in loans amounted to about $70 per taxpayer.