Join Date: Nov 2004
Obama Administration Loans Chrysler, GM More Money
The Obama Administration, as promised, is providing more funds for Chrysler and General Motors as working capital to keep them afloat as they try to meet the government-imposed deadlines.
Chrysler received about $500 million to get it through the end of April. The Obama Administration has set an April 30 deadline for Chrysler to negotiate a final deal with Italy's Fiat in order to be granted $6 billion more in government funds or face bankruptcy. And the government will end its support of Chrysler if it goes into bankruptcy.
GM is receiving $5 billion through May to help it meet its June 1 deadline to come back the Obama Administration with a viable restructuring plan or it faces bankruptcy, during which the government will provide funding.
At the same time, the United Auto Workers (UAW) union, a huge and active supporter of President Obama in the election, is urging its members to lobby the White House by phone or email to request fair treatment of workers and retirees in negotiations with both companies on new concessions, required by the government. The UAW represents 26,000 Chrysler workers and 62,000 GM workers.
"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.
President Obama's automotive task force has a meeting set up with representatives of salaried retirees from GM, Chrysler, Ford and bankrupt supplier Delphi Corp. on Friday. Retirees are vulnerable to significant cuts in their pensions and benefits.
At the White House on Monday, Obama's chief spokesman, Robert Gibbs, would not forecast where the talks were headed but said the administration was working "with all of the stakeholders involved" and was hopeful a solution would be found to "continue the Chrysler brand" and strengthen the 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, as reported by Reuters.
Chrysler Update: Negotiating With Many
Fiat CEO Sergio Marchionne is spending a couple of days this week in Detroit and
Washington, in hopes of negotiating a final deal with Chrysler that President Obama's automotive task force will bless. He returns to Italy for a Thursday board meeting. The Italian automaker releases its first-quarter financials that same day.
Marchionne is involved with Treasury Department meetings that kicked off Monday and also included Chrysler CEO Robert Nardelli and the United Auto Workers union president Ron Gettelfinger, according to the Wall Street Journal. The paper speculates signs are increasing that Chrysler is headed for liquidation. The paper, quoting unnamed sources, reported that some in the Obama administration have concluded that Chrysler isn't worth saving because of its weak product line and lack of international reach.
In Italy, Fiat's Chairman Paolo Fresco told the daily newspaper there, la Repubblica, in an interview that even if a Chrysler alliance is successful it won't be the last partnership for Fiat. He said an alliance with General Motors's German subsidiary, Opel, could make sense for Fiat.
On Monday, the Financial Times reported that GM is prepared to give away controlling stakes in Opel as well as its U.K. subsidiary, Vauxhall, in exchange for a promise to invest in a new venture formed from its European operations.
In Canada, Canadian Auto Workers President Ken Lewenza said it would be "very difficult" for his union to agree to new concessions requested by Chrysler and the U.S. government. Workers rallied in Toronto Monday to protect pensions.
In the category of getting the cart before the horse, the Ansa news agency said Fiat may
convert Chrysler's plant in Windsor, Ontario, which now makes minivans, to smaller B-segment cars. Minivan production would be moved to Chrysler's Toldeo, Ohio, plant that makes Jeeps. The Chrysler Toluca, Mexico, plant, which soon will be empty with the elimination of the Chrysler PT Cruiser, will be used to make A-segment models, including the Fiat 500 and a small Jeep. Chrysler President Jim Press showed off a Fiat 500 at the New York auto show last week and suggested this could be the shape of things to come for Chrysler in the future with an alliance with Fiat.
At Chrysler Financial, executives are denying a Washington Post report that it rejected $750 million in government loans from the Troubled Asset Relief Program (TARP) to cover short-term funding for its dealers and for car loans because it refused to accept the new executive compensation limits. Rather, Chrysler Financial insists it doesn't need the government loans because it has adequate private capital. Nevertheless, Chrysler Financial is looking into tapping funds form a separate government program through the Federal Reserve Bank.
GM Update: More Layoffs
General Motors began telling 1,600 workers this week, mostly at its downtown Detroit headquarters and its technical centers sprinkled around the Detroit suburbs, that they are out of jobs. The layoffs are part of GM's plan to eliminate 3,400 U.S. salaried positions by May 1 for a total of 47,000 globally. More cuts cannot be ruled out.
"These are difficult actions," North America President Troy Clarke wrote in an e-mail to employees Monday. "However, given the economic realities facing GM, these actions are necessary to help ensure the long-term viability of our company."
In Korea, GM Daewoo, which produces most small Chevrolets for global markets including the Aveo in the U.S., likely will have a 25-percent drop in exports because it is running low on cash.
Nick Reilly, GM's Asia Pacific president told Bloomberg in an interview at the Shanghai motor show Monday, that GM Daewoo initially planned to build as many as 1.8 million vehicles this year. The company received $2 billion in a credit line and has asked for additional loans from the Korea Development Bank, loans Reilly is optimistic GM will receive. GM Daewoo reported a record annual last year due to slumping auto sales and bad bets on currency.
GM Daewoo, which plans $1.9 billion of capital investment through 2010, may face "critical cash flow" in the second quarter without external help, Chief Executive Officer Michael Grimaldi has said.
GM, Chrysler Spend Less on Lobbying
Separately, Bloomberg reported that GM spent $2.8 million on lobbying in the first quarter, according to disclosures filed with the U.S. Congress Monday. During the same period a year ago, GM spent $4.1 million on lobbying. Chrysler reported lobbying expenses of $720,658 for the quarter, down from $1.4 million.