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GM says it needs $12 billion to survive

(Agencies)
Updated: 2008-12-03 07:08

WASHINGTON -- General Motors Corp. said Tuesday it needs $12 billion in government loans to keep operating, telling Congress in a bluntly worded report that its collapse could have "severe, long-term consequences to the US economy."

In this November 19, 2008 file photo, auto industry executives, from left, General Motors Chief Executive Officer Richard Wagoner; Chrysler Chief Executive Officer Robert Nardelli; and Ford Chief Executive Officer Alan Mulally, testify before a House Financial Services Committee hearing on the state of the auto industry, on Capitol Hill in Washington. [Agencies]

GM said it would seek up to $18 billion from the government: $12 billion in loans, including $4 billion by the end of December, and a separate $6 billion line of credit in case market conditions worsen.

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"Absent such assistance, the company will default in the near term, very likely precipitating a total collapse of the domestic industry," GM said, contending its collapse would have "a ripple effect that will have severe, long-term consequences to the US economy."

"There isn't a Plan B," said Chief Operating Officer Fritz Henderson. "Absent support, frankly, the company just can't fund its operations." He said GM would need $10 billion to $12 billion by late March.

GM, along with Ford Motor Co. and Chrysler LLC, submitted detailed plans to Congress in hopes of winning support for at least $25 billion in loans to keep the battered US auto industry afloat.

GM said it would take significant steps by 2012 to restructure, including the reduction of 20,000 to 30,000 workers, the cutting of nine plants and the slashing of 1,750 dealer locations.

It would focus future efforts on four core brands -- Chevrolet, GMC, Buick and Cadillac. Henderson said the company was conducting an "expedited and strategic review" of its Saab brand and was discussing options with dealers about the future of Saturn. Pontiac would become a specialty niche brand.

The plan supports the formation of a government oversight board to ensure that taxpayers are protected and the company is restructured. GM would negotiate swapping some of its $66 billion in debt for equity stakes.

GM would seek concessions from the United Auto Workers union to help it survive. Areas under discussion include job security provisions and manpower levels.

CEO Rick Wagoner will work for $1 per year and top executives will take major pay cuts. Henderson said GM would "immediately cease all corporate aircraft operations," meaning company leaders would travel by commercial aircraft.

GM said the loans could be fully repaid by 2012, but if market conditions deteriorated, the company would need more time.