Detroit's automakers, making a second bid for $25 billion in funding, are presenting Congress with plans Tuesday to restructure their ailing companies and provide assurances that the funding will help them survive and thrive.
General Motors Corp., Ford and Chrysler LLC said they would refinance their companies' debt, cut executive pay, seek concessions from workers and find other ways of reviving their staggering companies.
The Big Three executives also are offering a series of mostly symbolic moves to burnish their images, badly tattered after they arrived in Washington D.C. last month on three separate private jets to plead for a federal lifeline for their struggling companies.
Ford CEO Alan Mulally said he'd work for $1 per year if his firm had to take any government loan money. The company's plan also says it will cancel all management employees' 2009 bonuses, scrap merit increases for its North American salaried employees next year, and sell its five corporate aircraft.
And for this week's round of congressional hearings on the auto bailout, all three company chiefs will skip the lavish travel arrangements. Mulally is coming by car from Detroit for this week's second round of congressional hearings on government help for the Big Three. GM Chief Rick Wagoner will drive a Chevrolet Malibu hybrid sedan for the 520-mile trek from Detroit to Capitol Hill, spokesman Tony Cervone said Tuesday. And Chrysler LLC CEO Robert Nardelli won't travel by corporate jet, but a spokeswoman declined to elaborate on his travel plans, citing security reasons.
The unions were preparing to make sacrifices as well. UAW leaders summoned local union leaders from across the country to an emergency meeting Wednesday in Detroit to discuss concessions the union could make to help auto companies get government loans.
U.S. automakers are struggling to stay afloat heading into 2009 under the weight of an economic meltdown, the worst auto sales in decades and a tight credit market. General Motors, Ford and Chrysler went through nearly $18 billion in cash reserves during the last quarter, and GM and Chrysler have said they could collapse in weeks.
Top executives from the Big Three failed last month to convince a skeptical Congress that they were worthy of $25 billion in loans. House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., ordered them to outline major changes, including the elimination of lavish executive pay packages and assurances that taxpayers would be reimbursed for the loans.
All three companies are filing separate plans. Congressional hearings are planned for Thursday and Friday.
"I believe the industry will make a compelling case for bridge loans that will allow the companies to return to firm financial footing," said Sen. Carl Levin, D-Mich.
GM will outline efforts to negotiate swapping some of the company's debt for equity stakes in the automaker, either shares or warrants for them, said two people briefed on the company's plan.
With eight separate brands, GM will also discuss efforts to shed brands but it would prefer to sell them instead of shutting down Pontiac, Saturn or Saab, said one of the people briefed on the plan. Killing off brands, like GM did with Oldsmobile in 2004, would require cash the company doesn't have, the person said. The people briefed on GM's preparations didn't want to be identified because the plan hadn't been completed.
Some members of Congress have urged the Big Three executives to take major pay cuts as part of the deal. Chrysler's Nardelli said he would work for $1 a year, and a similar commitment is expected from GM's Wagoner.
Chrysler is expected to outline changes that would include a swap of debt in the company for equity stakes and reductions in some vehicle models, according to a person who was briefed on the plan. The person spoke on condition of anonymity because the discussions were private.
Cash stockpiles at GM and Chrysler are dangerously close to the minimum amount required to run the companies, meaning they could have trouble paying all their bills by the end of the year.
GM, according to its quarterly report filed with the Securities and Exchange Commission, owes creditors $45 billion and it must pay more than $7.5 billion early in 2010 to a United Auto Workers trust fund that will take over retiree health care payments.
Ford owes more than $26 billion, with $6.3 billion due to its UAW trust fund at the end of 2009. Chrysler, a private company, does not have to open its books, but its CEO, Nardelli, has said it would be difficult for the company to make it without federal aid. All three likely are negotiating with the UAW for delays in payments to the trusts.
The companies are expected to seek other concessions from the United Auto Workers, including the elimination of the much-maligned jobs bank in which laid-off workers keep receiving most of their pay.
Alan Reuther, the UAW's legislative director, declined to say on Monday what kinds of concessions the union might take but said "we realize that all stakeholders need to come to the table to do what's necessary to ensure the viability of the companies. We're prepared to do our part."
The UAW leaders subsequently disclosed plans for the Wednesday meeting, where they will discuss the possibility of restructuring a multibillion-dollar union-administered health care fund so that the automakers can delay payments, according to a person familiar with the matter.
They also plan to discuss eliminating the jobs bank.
The companies are resisting calls for bankruptcy. The executives said last month that bankruptcy cannot be an option because no one would buy a car from an automaker that may not survive the life of the vehicle.