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Wednesday, December 3, 2008

Report : GM, Ford and Chrysler give out plans for the Congress; $25 billion loan will not be enough, Detroit’s big 3 request a total of $34 billion

When GM, Ford and Chrysler started aid talks with the US Congress back in November, the Congress decided to stop the talks until the big 3 gave out their future plans. If the Congress accepted, the original plan was to give a total of $25 billion loan for the big 3. However, with each company showing their own plans and costs, it seems the total now is about $34 billion.

Starting with GM, they're is seeking the most with a total of $18 billion - up from its original request of $10 billion or $12 billion in November. The General says that it needs a total of $12 billion by March, $4 billion of which it needs by Dec. 31 or it will be risking going under. The company said it will seek another $6 billion after March if the auto industry continues to fail. All this money is for a plan they showed out to the Congress, and it includes:

-Focus on "core brands": Chevrolet, Buick, GMC and Cadillac
-Launch predominately high mileage, energy-efficient cars and crossovers
-Sell Saab, HUMMER
-Sell or kill Saturn
-Reduce Pontiac to a "niche" brand
-Trim dealerships from 6,450 to 4,700
-Reopen talks with UAW to cut manufacturing costs further
-Reduce total workforce from 96,000 to 65-75,000
-Negotiate with lenders, remove $35.6 billion in debt


Moving on to Ford, they're seeking $9 billion in credit line if need be. CEO Alan Mulally said that the company shouldn’t need loans unless the economy worsens and auto sales continue to get worse. Actually, Ford has been doing its best job to keep itself on the safe side. However, they still need to show the Congress their plans, and it includes:

-Ford expects both its overall and its North American automotive business pre-tax results to be breakeven or profitable in 2011, excluding any special items
-Ford company said it is exploring strategic options for Volvo Car Corporation, including the possible sale of the Sweden-based premium automaker
-Since 2007, Ford has sold Aston Martin, Jaguar, Land Rover and the majority of its stake in Mazda
-Ford’s plan calls for an investment of approximately $14 billion in the U.S. on advanced technologies and products to improve fuel efficiency during the next seven years
-Half of the Ford, Lincoln and Mercury light-duty nameplates by 2010 will qualify as “Advanced Technology Vehicles” under the U.S. Energy Independence and Security Act
-From its largest light duty trucks to its smallest cars, Ford will improve the fuel economy of its fleet an average of 14 percent for 2009 models, 26 percent for 2012 models and 36 percent for 2015 models
-Ford will continue to work to reduce its dealer and supplier base to increase efficiency and promote mutual profitability


Finally, Chrysler has requested a total of $7 billion by the end of 2008. That's a lot of money in a short period of time, so Chrysler had to show some ambitious plans for the Congress. Their "Providing Cars and Trucks People Want to Buy" subject plan includes:

- The first question is, what changes has Chrysler made to help itself? Since Chrysler became an independent company in 2007:
o We eliminated over 1.2 million units of capacity, or 30 percent
o We reduced fixed costs by $2.4 billion and, separated over 32,000 employees – including 5,000 on the Wednesday before Thanksgiving. And at the same time
o We invested in product improvements – over half a billion dollars in our first 60 days
o We improved our latest JD Power quality scores, and reduced our warranty claims by 29 percent
- Why does Chrysler need the funding? We need to address the unprecedented drop in vehicle sales caused by the financial crisis. U.S. sales are down from a 17 million unit selling rate in early 2007, to an estimated 11 million unit selling rate for the fourth quarter of 2008 – a 38 percent decline
- So how will the bridge loan be used? Cash will support ongoing operations as we continue to restructure the business, including in the first quarter alone:
o $8.0 billion in payments to parts suppliers
o $1.2 billion for other vendors
o $900 million in wages
o $500 million in healthcare and legacy costs
o $500 million in capital expenditures
- So, who is contributing to saving Chrysler? First and foremost, Chrysler and its extended enterprise will. That starts with me. Chrysler’s CEO Bob Nardelli will receive a salary of $1 a year. I have no employment contract, no change of control agreement, no “golden parachute,” and receive no health care or life insurance benefits from the company. We are committed to negotiate concessions from all of our constituents.
- The next question - Does Chrysler plan to build cars and trucks that consumers want to buy, and that support the country’s energy security and environmental goals? Our product plan features 24 major launches from 2009 through 2012. For the 2009 model year, 73 percent of our products will offer improved fuel economy compared to 2008 models. We plan on launching additional small, fuel-efficient vehicles. ENVI is our breakthrough family of all-electric … and range - extended electric vehicles – similar to the one parked outside. Chrysler’s product plan includes the introduction of the Ram Hybrid and our first electric-drive vehicle in 2010 with three additional models by 2013


So the question comes now, will the Congress accept Detroit’s big 3 request? No word yet from any members from the Congress, but we all expect that they'll agree.

Source: [Automotive News]

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