White House ups pressure on U.S. automakers
DETROIT —
U.S. automakers came under White House pressure Sunday to make painful choices as a deadline loomed this week for cap-in-hand General Motors and Chrysler to present their recovery plans to the government.
David Axelrod, a senior adviser to President Barack Obama, said the collapse of talks between GM and the United Auto Workers union underlined the gravity of the situation ahead of Tuesday’s restructuring deadline.
“We need a thriving auto industry in this country,” he said on Fox News Sunday, stressing that millions are employed by GM, Chrysler and Ford and by related suppliers.
“But as the president has said many times, that’s going to involve significant restructuring of the industry so that they’re looking forward and not back in producing the kind of cars that people are going to buy in the future,” Axelrod said.
“And that’s going to involve concessions on the part of everyone, not just the auto workers, but shareholders, creditors and, of course, the executives who run the company.”
GM and Chrysler, which are receiving $13.4 billion in government loans, have until Tuesday to present preliminary plans to the Treasury Department outlining their steps to reduce costs and plan for the future.
The final plan that will serve as a basis for the Treasury’s decision to call in or extend the loans is due by March 31.
The two companies were brought to the brink of bankruptcy last year as auto sales collapsed amid a credit crunch and widening recession, but Congress responded with skepticism late last year to their recovery plans.
Ford insists it has sufficient cash reserves to survive the downturn without federal aid despite a $5.9 billion loss in the fourth quarter.
Negotiations on union backing for the restructuring at GM collapsed over the weekend after the UAW reportedly balked at management’s plans to reform pensions for retired workers.
“Obviously this is a difficult situation, and everyone’s going to have to continue to work toward a solution,” Axelrod said in response.
Asked if the White House was ruling out bankruptcy for GM and Chrysler, he added: “I’m not going to prejudge anything… We’ll wait and see what they have to say on Tuesday.”
Neither GM nor Chrysler, which is also locked in tense talks with the UAW, has received approval from the union or from creditors and both have warned they may need more government help if economic conditions deteriorate.
Analysts forecast that total auto sales will come in at between 10 million and 11 million units this year, which would be the industry’s worst performance since World War II after adjusting for population growth.
Chrysler said its plan will not be affected by an alliance announced last month with Italy’s Fiat, which some analysts say could complicate the private automaker’s efforts to persuade reluctant lawmakers to extend more aid.
“We will be able to do it on our own,” said Chrysler vice chairman Jim Press, who added that despite concerns about Fiat benefiting from U.S. government help, the alliance will “save American jobs and speed introduction of fuel-efficient cars.”
“I can tell you we have accepted the fact that there really is a harsh new reality in the auto industry,” Press said in a speech to the Economic Club of Chicago Thursday, detailing 32,000 jobs cuts that are in the works.
But Chrysler needs an additional $3 billion in loans beyond the $4 billion approved in December, as well as concessions from creditors and the UAW, Press stressed.
Few surprises are expected in the submission from General Motors, which is using the plan it handed to Congress on Dec 2 to guide its restructuring plans, GM spokesman Tom Wilkinson said.
GM has already slashed more than one million units of capacity over the past year and could cut more when it makes its preliminary submission to Treasury, he said.
The company last week announced plans to eliminate the jobs of an additional 3,400 of its 29,000 salaried employees worldwide and to offer early retirement packages to all its 62,000 hourly U.S. workers.
Wire reports
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bebert
If anyone can push the auto companies into bankruptcy, it is this administration and Nancy Pelosi. It is remarkable that the party that is supposed to be for the workers would impose restrictions on the auto companies that would make them less profitable and less able to get out of their hole. This would include their pressure to force the companies to build and sell more small cars, which make very little profit and electric vehicles which have never made any profit. And even hybrids are economic drag. Only Toyota's Prius is profitable and that is after years of losses in the beginning.
What should be noted, is that Ford is pulling itself out of the hole. Not by selling hybrids or small cars, but through increased sales of its F-series pickup truck - the company's bread and butter that brings in about 20% profit per vehicle. Under a Pelosi/Obama plan, this wouldn't be possible and Ford would be heading for liquidation.
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Betting
"If anyone can push the auto companies into bankruptcy, it is this administration and Nancy Pelosi".
Well then, the US is up the proverbial creek as the last administration didn't do anything either, probably less. Anyway, I'll back Obama rather than the Republicans. At least give his plan a decent amount of time of work, the other guys were given 8 years and only succeeded in stuffing the whole lot up.
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Badsey
I believe the profit margin on the Prius was $100 for Toyota and the markup was thousands at the dealer. Now the markups are lower or gone.
Selling cars is a complex game --> far too complex for someone like Pelosi to understand.
I like the hybrid or even electric car idea. If America had better rail a car that went 30-50-100 miles on one electric charge would be fine. =Had to be a hybrid due to U.S. poor rail/mass transit.
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JohnBecker
"If anyone can push the auto companies into bankruptcy, it is this administration and Nancy Pelosi."
Actually, the auto companies have been doing a great job all on their own. They made hay while they could still sell SUVs and big trucks, and never developed the more fuel efficient models that would have saved them right now.
This falls along the same lines as the financial meltdown. Too much greed, not a thought about what might happen just a few months down the road. As long as housing keeps appreciating at inflated rates, as long as gasoline stays artificially cheap... no problems.
Back when there were a dozen car companies and hundreds of banks, none of these problems would have mattered. We could have lost 25% of the companies and not really felt it. But there has been so much consolidation in both industries that a handful of companies can fail and take the entire economy down with them. And the U.S. government (both the Republican and Democratic flavors) stood by and let it happen.
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GJDailleult
Not a single mention of Nancy Pelosi in this article, and yet two comments bashing her. If people are going to parrot Republican talking points on JT, can you at least take the time to search the article and check that your target is actually in there somewhere.
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unscrejects
They can start by protecting them by auditing the imports - you'll be surprised at the scams they'll uncover, scams that literally put the big three into this predicament.
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