General Motors Corp's plan for a bankruptcy filing involves a quick sale of the company's healthy assets to a new company initially owned by the U.S. government, a source familiar with the situation said on Tuesday.

The source, who would not be named because he was not cleared to speak with the media, did not specify a purchase price. The new company is expected to honor the claims of secured lenders, possibly in full, according to the source.

The remaining assets of GM would stay in bankruptcy protection to satisfy other outstanding claims.

GM has about $6 billion in secured debt, including a secured revolving credit and bank debt.

The government's plans include giving stakes in the new company to GM's union and bondholders, although the ownership structure of the company is still being negotiated, said the source who is familiar with the company's plans.

Source: Reuters

General Motors Corp (GM.N) has asked for $2.6 billion of low interest government loans to support the development of three new hybrid vehicles, according to a business plan update released on Wednesday.

GM's loan request, which would help develop two spinoffs from its all-electric Chevrolet Volt, raises to $10.3 billion the aid it is seeking under a U.S. Energy Department program designed to support development of fuel-efficient vehicles.

The request for low-interest taxpayer backed loans was made on Monday to the U.S. Treasury Department, GM said. It was the automaker's third request for loans under the program.

It was also the first time GM has confirmed that it intended to move ahead with production of variants of the Volt, a battery-powered car that will carry a small, 1.4-liter engine as a generator designed to kick in after 40 miles.

Source: Reuters

General Motors Corp. says its restructuring plan is starting to take hold, improving the automaker's fortunes at least to the point that it won't need a $2 billion government loan installment that it had requested for March.

Chief Financial Officer Ray Young said Thursday that GM formally told the Obama administration's autos task force on Wednesday that it wouldn't need the money this month. But in an interview with The Associated Press, Young would not say when the struggling automaker would need more government money or whether it will reduce the size of its loan request. "It seems like our companywide cost reduction efforts are moving well, as well as we've been able to defer spending that we previously anticipated in January and February," Young said. "I think that's a positive development."

GM, which is living on $13.4 billion in government loans, has requested another $16.6 billion as it tries to weather the worst auto sales slump in 27 years. Young said GM's cash burn rate, the amount of spending above revenue, has slowed since the company submitted a viability plan to the government on Feb. 17. "The cash burn that we thought we were going to have in January and February is not as high. Clearly we still have a cash burn," he said, attributing the burn rate to a lack of revenue from the company shutting down many of its factories for the month of January.

He would not say if GM will need another government loan draw in April. In its viability plan filed Feb. 17, GM asked for $2 billion in March and another $2.6 billion in April. It would not need any more money until 2011 when a $4.5 billion revolving line of credit comes due. The company also says it could need up to $7.5 billion more if the economy doesn't improve, for a total of $30 billion by 2011. It plans to start repaying the loans with $2 billion in September.

GM shares were up 15 cents, or 8 percent, to $2.01 in midday trading.

General Motors Corp. said in a government filing Thursday that its accounting firm has found there is "substantial doubt" about the automaker's ability to survive.

The embattled automaker made the disclosure in a 480-page filing with the Securities & Exchange Commission.

The filing's grim tone is not a surprise. GM has sustained large and continuing losses that have now reached $82 billion over the last four years. It had previously said it needed additional federal loans, coupled with improved sales, to remain in business.

GM said in a separate statement that it is confident it will be able to turn around the business if it gets the federal help it is seeking and when consumer demand for autos returns.

"The auditor's opinion has no impact on the aggressive actions we are taking to restructure our business for long-term viability," GM said.

Source: CNN Money

Ford Motor Co. Executive Chairman Bill Ford Jr. and CEO Alan Mulally said they would take a voluntary 30 percent pay cut Tuesday as the struggling automaker asked union workers to accept major concessions that could cost them thousands of dollars a year.

The company also is eliminating bonuses for all salaried employees for a second consecutive year and is suspending cash compensation for board members to help meet its goal of returning to profitability in 2011, according to a memo e-mailed to white-collar workers by the two executives Tuesday afternoon.

"We know these are challenging times and we all are affected by the tough actions we are taking," Ford and Mulally said in the memo, a copy of which was obtained by The Detroit News. "Both of us have voluntarily agreed to accept a 30 percent reduction in salary for 2009 and 2010."

The announcement comes as members of the United Auto Workers prepare to vote on a major amendment to their contract with Ford that includes new concessions and provisions for another round of buyouts for U.S. factory workers.

The tentative deal does not cut base wages, health benefits or pensions, but workers are being asked to give up cost-of-living pay increases, as well as performance bonuses that were worth $500 last year and an annual Christmas bonus worth $600, according to a summary of the agreement obtained by The News.

You won't see many clocks on the walls at Chrysler's headquarters in Auburn Hills.The automaker took most of them down -- to save an estimated $20,000 a year on batteries and having workers change the time twice a year for daylight saving time.

It's part of the company's intensified efforts to live on a shoestring budget as it operates on $4 billion in federal loans. Chrysler, which is seeking another $3 billion in assistance, is expected to turn in its viability plan to the government today as a condition of receiving those funds.

Meanwhile, Chrysler is cutting to save money. Hit the jump for the full list!

• Stopped plowing the top floor of five parking decks and four paved lots at its headquarters complex, for a total savings of more than $350,000 this winter.

• Removed 40,000 of the 80,000 lightbulbs at its headquarters complex to save $400,000 a year.

• Cut spending on Christmas decorations by at least $11,000, to $1,000 in 2008.

• Turned down the temperature in hallways from 72 degrees to 68, to save $70,000 a year.

• Put 32 pieces of art, appraised in 2007 at $2.3 million, up for sale.

• Cut food services. Hours were trimmed at the main cafeteria. Four satellite cafeterias, sandwich kiosks and the executive dining room have been shut down.

Source: Freep

General Motors Corp said on Tuesday it could need a total of up to $30 billion in U.S. government aid -- more than doubling its original aid -- and would run out of cash as soon as March without new federal funding. The request for additional aid from the top U.S. automaker came in a restructuring plan GM submitted to U.S. officials on Tuesday.

The GM restructuring plan of more than 100 pages was posted on the U.S. Treasury Web site. The request came on the same afternoon that No. 3 U.S. automaker Chrysler requested an additional $5 billion from the current $4 billion in U.S. government aid, saying it expected the brutal downturn in the U.S. market to run another three years. GM also said it had not reached deals with bondholders and its major union to reduce some $47 billion in debt but would work to reach those agreements by the end of March.

In response to signs of a prolonged slump in demand for new cars and trucks, the automaker also said it would step up cost-cutting, reducing its global workforce by 47,000 jobs this year and cutting five additional U.S. plants by 2012. In addition, GM said it would cut its U.S. workforce by another 20,000 jobs by 2012 with most of those reductions coming earlier.

Source: Yahoo

General Motors Corp, nearing a Tuesday deadline to present a viability plan to the U.S. government, is considering as one option a Chapter 11 bankruptcy filing that would create a new company, the Wall Street Journal said in its Saturday edition.

"One plan includes a Chapter 11 filing that would assemble all of GM's viable assets, including some U.S. brands and international operations, into a new company," the newspaper said. "The undesirable assets would be liquidated or sold under protection of a bankruptcy court. Contracts with bondholders, unions, dealers and suppliers would also be reworked."

Citing "people familiar with the matter," the story said that GM could also ask for additional government funds to stave off a bankruptcy filing.

GM declined to comment, the story said.

Source: Reuters

Just as Chrysler LLC announced a sequel to its ownership saga, the struggling automaker also unveiled plans to help underwrite the fourth installment of the "Terminator" movie series.

Chrysler, which has received $4 billion in emergency aid from the U.S. government, has a deal to place its vehicles in cameo roles in "Terminator Salvation," scheduled for release later this year and starring Christian Bale, executives said on Tuesday.

Financial terms of the sponsorship deal were not disclosed.

"This spring, Terminator 4 comes out and we will be one of the sponsors," Chrysler director of media Susan Thomson said in a presentation at the Automotive News World Congress. "We have a following with the Terminator movies and we are going to continue with that."

Source: Reuters

President-elect Barack Obama praised the Bush Administration's decision to bail out General Motors Corp. and Chrysler LLC, but said the automakers must end "bad management practices."

"Today's actions are a necessary step to help avoid a collapse in our auto industry that would have devastating consequences for our economy and our workers. With the short-term assistance provided by this package, the auto companies must bring all their stakeholders together -- including labor, dealers, creditors and suppliers -- to make the hard choices necessary to achieve long-term viability," Obama said in a statement.

"The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely required to save this critical industry and the millions of American jobs that depend on it."

Obama's advisers were kept apprised of the talks between the Treasury Department and General Motors and Chrysler. GM is to get up to $13.4 billion. GM and Chrysler are to each get $4 billion on Dec. 29 under the terms of the deal

The automakers must file restructuring plans by Feb. 17 and make significant progress by March 31 -- or be required to return the loans. President Bush rejected calls to force the auto companies into bankruptcy -- something Obama had also opposed.

Obama and his advisers will have broad latitude to rewrite the terms of the loans or add additional money if they see fit when he takes office Jan. 20. Michigan members of Congress are already agitating for Obama to soften some of the conditions on automakers -- especially regarding hourly workers' wages and benefits.

Source: Detroit News

General Motors Corp. and Chrysler LLC will get $13.4 billion in emergency government loans in exchange for substantially restructuring their businesses, President George W. Bush announced.

Another $4 billion will be available to GM in February providing Congress releases the second half of the $700 billion Troubled Asset Relief Program fund originally set up to bail out financial institutions. The automakers have until March 31 to meet the conditions of the loans, including demonstrating they have a plan to become profitable, or be forced to repay.

Winning the assistance is a reprieve for GM, the biggest U.S. automaker, and No. 3 Chrysler after they said they would run out of operating funds as soon as this month. Bush is stepping in after Senate Republicans’ refusal last week to take up a House- approved rescue raised the prospect that the companies would fail, costing millions of jobs. More in the jump..

“These are not ordinary circumstances,” Bush said at the White House today. “In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action.”

President-elect Barack Obama endorsed the plan, calling it a “necessary step” to avoid a major blow to the economy.

A Second Chance

“The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely required to save this critical industry,” Obama said in a statement.

GM is reeling from almost $73 billion in losses since 2004 and a 22 percent slump in U.S. sales this year, while the drop at Auburn Hills, Michigan-based Chrysler is 28 percent, the steepest among the major automakers.

The package is intended for GM and Chrysler initially. Ford Motor Co., the second-biggest U.S. automaker, has said it can continue operating without aid for now.

The loan term is three years. Of the initial $13.4 billion, GM would get $9.4 billion and Chrysler $4 billion, said Joel Kaplan, Bush’s deputy chief of staff.

Under the terms of the plan, the government’s debt would have priority over any other creditors. The automakers also must provide warrants for non-voting stock, accept limits on executive pay, and give the government access to financial records.

No Dividends

No dividends may be issued until the loans are repaid. In addition, the automakers must cut their debt by two-thirds in an equity exchange.

For workers, GM and Chrysler would be required to make half of the payments to a union retirement fund in equity and eliminate a program that pays union workers when they don’t have work. Unions and management would have to negotiate a plan to have compensation and work rules in place by Dec. 31, 2009, that will make the U.S. companies competitive with foreign automakers. The requirements could be modified by negotiations with the union and debt holders.

The conditions are largely those set out in the legislation passed by the House and blocked in the Senate.

“We’ve got a huge amount of work to do over the next 90 days and beyond,” GM Chief Executive Officer Rick Wagoner said at a Detroit news conference.

“Chrysler is committed to meeting these requirements,” the company’s chief executive officer, Bob Nardelli, said in a statement.

Shares Rise

GM shares rose 46 cents, or 13 percent, to $4.12 at 11:42 a.m. in New York Stock Exchange composite trading. Ford gained 12 cents, or 4.2 percent, to $2.96. Before today, the companies’ shares had tumbled 85 percent and 58 percent this year.

The government rejected letting the companies go bankrupt, as had been urged by some lawmakers opposed to a bailout.

Bankruptcy would “worsen a weak job market and exacerbate the financial crisis,” Bush said. “It could send our suffering economy into a deeper and longer recession.”

The terms of the loans represent a major challenge for the automakers, Maryann Keller, an independent auto analyst and consultant in Greenwich, Connecticut, said in a Bloomberg Television interview.

“The restructuring they’re going to have to go through will be huge,” Keller said. “I can’t see a way for GM to operate properly with the capital structure they have.”

Consultations

Kaplan said representatives of Obama, who takes office Jan. 20, have been kept aware of the administration’s actions.

The Treasury secretary would in effect be a “car czar,” making sure the automakers meet deadlines and having the authority to revoke the loans, Kaplan said. The Bush administration didn’t want to designate an independent overseer with a month left in office.

Kaplan, asked if Chrysler should merge with GM, sidestepped the question.

“We are not going to tell the manufacturers what the right structure is for them to be viable; we’re just going to tell them that if you want taxpayers’ assistance, you’re going to have to make those decisions, and you’re going to have to prove it,” he said.

Treasury will need to go to Congress to get the remaining $350 billion in TARP funds released, including the $4 billion in additional loans to the automakers, Kaplan said. That may be left for Obama’s administration, he said.

Source: Bloomberg

Call it the deal Detroit can't refuse.

In return for three months of redemption and about $15 billion, congressional Democrats and the Bush administration were honing a pact Monday night that would put the industry's future under government scrutiny and perhaps grant Washington a majority stake in either General Motors Corp. or Chrysler LLC.

Michigan lawmakers said while a draft from congressional Democrats needed tweaks, they were hopeful a bill could pass Congress in the next few days, forestalling an economic calamity that would eliminate 400,000 jobs in the state and 3.3 million nationwide, according to one study.

The draft "represents great progress," said Michigan Sen. Carl Levin. "It's not a done deal in terms of a draft bill, and it's far from a done deal in terms of passage."

Source: Freep

President-elect Barack Obama announced support Sunday for a short-term government bailout of the nation's carmakers that is tied to industry restructuring. He also accused auto executives of a persistent "head-in-the sand approach" to long-festering problems.

Obama said Congress was doing "the exact right thing" in drafting legislation that "holds the auto industry's feet to the fire" at the same time it tries to prevent its demise.

In an appearance on NBC's "Meet the Press" and later at a news conference, Obama at one point suggested some executives should lose their jobs.

Source: CNN Money