GM, Chrysler to cut 50,000 jobs
Canadian repercussions unclear as 26,000 jobs in peril outside U.S.
U.S. automakers are calling on the government to provide even more funding to ensure the survival of General Motors Corp. and Chrysler LLC.
General Motors on Tuesday said it could need up to $30 billion from the U.S. Treasury Department to continue operating.
Included in that amount is $13.4 billion the company has already received. Previously, GM had said it could need as much as $18 billion.
GM said it could run out of money by March without the new funds from the government.
General Motors is:
- Seeking $30 billion US in government funding.
- Cutting 47,000 jobs.
- Downsizing to 33 factories.
- Possibly eliminating Hummer, Pontiac, Saab brands.
- Phasing out Saturn.
- Focusing on Chevrolet, Cadillac, GMC and Buick.
- Promising to repay loans by 2017.
The automaker said it considered the option of bankruptcy but the only credit available to finance a reorganization would be from the government and could cost as much as $100 billion.
Both GM and Chrysler said they will also have to further cut jobs and curtail auto production, reducing the number of models they offer to car buyers.
GM said it will cut 47,000 jobs — including 37,000 hourly workers and 10,000 salaried employees. The company will also shut down five more factories by 2012, reducing its operations to a total of 33 plants.
Workers to see cuts in 2009
A total 26,000 of the cuts will come from outside the U.S. as GM downsizes its global operations. It is not yet clear what the impact will be in Canada. The cuts are expected to be made by the end of 2009.
The company may be eliminating its Hummer brand and said it will make a final decision by March 31.
GM is also considering selling its Pontiac and Saab brands and the Saturn brand is being phased out, officials said. The Saturn plant will remain in operation until the end of its current life cycle in 2011, officials said.
The changes will see GM focusing its efforts on Chevrolet, Cadillac, GMC and Buick.
GM also said it will make all of its new vehicles from 2009-2014 fuel-efficient or crossovers.
"All these actions will reduce our labour costs and improve our competitiveness," said Rick Wagoner, CEO of General Motors.
GM's plan said it plans to start repaying the government in 2012 and to pay off its loans by 2017.
Chrysler requests $5 billion top-up
Meanwhile, Chrysler is asking for another $2 billion US on top of the $4 billion it has already received and the $3 billion it's expecting from Washington.
It plans to cut 3,000 jobs and three models — the PT Cruiser, Dodge Durango and Chrysler Aspen — as part of its restructuring plan. None of Chrysler's job cuts are expected to impact its Canadian operations.
- Requesting $5 billion US in new government funds.
- Cutting 3,000 jobs.
- Cutting fixed costs by $700 million.
- Removing 100,000 units from production.
- Eliminating PT Cruiser, Dodge Durango and Chrysler Aspen models.
- Launching 24 vehicles in the next 48 months.
The company said it has reached fundamental agreements on concessions with unions, dealers, suppliers and lenders to achieve the savings required by its government loan terms.
Chrysler also said it will reduce a manufacturing shift, remove 100,000 units from production capacity and cut costs by $700 million.
The plans were submitted to the Treasury Department on Tuesday and explain how the Detroit automakers plan to become viable and repay loans.
The plans will now be vetted by Treasury and a high-level task force that was created by the Obama administration on Sunday night to oversee the restructuring of the automakers, which are struggling with a 26-year low in auto sales amid the world economic recession.
White House reviewing plans
The White House released a statement saying it will be reviewing the automakers' plans but that it is clear that more will be required of the companies and their stakeholders.
"It is clear that going forward, more will be required from everyone involved — creditors, suppliers, dealers, labor and auto executives themselves — to ensure the viability of these companies going forward," White House Press Secretary Robert Gibbs told reporters on Air Force One Tuesday night.
Gibbs added that bankruptcy for the Detroit automakers has not yet been ruled out.
The rush to submit the plans came on the same day GM was to get the second installment in U.S. government loans — $4 billion US — on top of the $9.4 billion it got earlier. Chrysler was to get $3 billion on top of its earlier $4 billion, according to a report from Associated Press.
Prime Minister Stephen Harper said Tuesday he is not concerned about the possibility of General Motors Corp. moving out of Canada as the Detroit-based company restructures its operations.
"We've had good discussions with the company," Harper said. "Obviously, there is a range of options and the restructuring itself will be quite complex. But I'm confident that with Canada, with the partnership with Ontario, coming to the table with our share of funding that we'll maintain a strong industry in this country."
Canadian unions ready to compromise
Ken Lewenza, president of the Canadian Auto Workers union, said Canada's auto industry is at the mercy of the American parent companies. CAW is working to dissect plan to see what it means for Canada, Lewenza said.
"We know that Chrysler, Ford and General Motors is going to be a smaller company and we know that based on the global financial crisis and based on what the government is going to put on their terms and conditions, the CAW is going to have to make some compromises," Lewenza said.
Lewenza said union leaders have agreed to restructuring talks with the Canadian units of the Detroit Three automakers — GM, Ford and Chrysler — and the talks will begin in the next few weeks.
"Those negotiations would be aimed at ensuring that active labour costs at Canadian facilities of the three companies remain fully cost competitive with the companies' counterpart facilities in the United States, even as those operations are restructured in coming months," Lewenza told a news conference late Tuesday.
Chrysler Canada, Ford Canada and GM Canada have been cutting plants and jobs for the last two years or so across southern Ontario where they operate as they cope with the recession and credit crunch that have eroded car sales across North America.
The Canadian auto industry lost approximately 13,000 jobs in 2008, and analysts predict it could lose between 15,000 and 20,000 additional jobs in 2009 as auto sales in the U.S. continue to slump and the major companies work to cut costs.
The Canadian Auto Workers union agreed to a three-year wage freeze in 2008, saving the industry about $900 million in wage costs.
"At the end of the day we're going to take our responsibility as a union seriously and do what we need to do to protect investment in Canada, protect our jobs in Canada and protect our retirees in Canada," Lewenza said.
Tentative agreement for U.S. union
In the U.S., the United Auto Workers union said it has reached a tentative agreement with Chrysler, GM and Ford Motor Co. on modifications to existing labour contracts.
Terms of the deal were not announced, but they were expected to eliminate the jobs bank through which furloughed autoworkers get most of their pay while laid off. Laid-off workers would now have to file for unemployment benefits.
The deal was also expected to include work rule and other changes that the government loan terms set out so the companies' labour costs are competitive with those of their Japanese counterparts that have U.S. factories.
UAW President Ron Gettelfinger said in a statement that discussions are continuing with all three companies about billions of dollars in cash payments into the trust funds, called voluntary employees beneficiary associations.
Tony Faria, an auto analyst at the University of Windsor, said any American concessions will likely be copied in Canada.
"Whatever givebacks the UAW agree to, the companies in Canada will be looking for about the same things," he said.
With files from the Associated Press and the Canadian Press