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US carmakers in new bail-out plea US carmakers in new bail-out plea
(about 2 hours later)
General Motors has asked US Congress for a loan of $12bn (£8bn), with an additional $6bn if necessary, to help it survive the economic downturn. Chrysler, Ford and General Motors have all submitted their proposals to Congress for multi-billion dollar loans upon which their survival could depend.
Earlier on Tuesday, Ford asked Congress for a $9bn (£6bn) bridging loan in case it gets into financial difficulties. The so-called Detroit Three of troubled US carmakers have asked for a combined total of $34bn (£22.8bn; 26.8bn euros).
Chrysler is also presenting its new cost-cutting plans to Congress in the hope an emergency loan. Slashing costs, reducing levels of debt and investing in greener technologies form the centre-piece of each proposal.
The Detroit Three also reported huge falls in sales for November as the economic slowdown deepens. The chief executives of Ford and GM have even offered to work for $1 a year if Congress approves the emergency aid.
Sales at all three of the carmakers have plunged as US consumers tighten their belts in the face of the severe economic downturn.
Ford sold 31% fewer light vehicles in November compared with the same month last year.
GM suffered a 41% drop in sales for the month, while Chrysler fared worse still, with sales plummeting 47%.
Loan proposals
General Motors asked Congress for a loan of $12bn (£8bn), with an additional $6bn if necessary, to help it survive.
Ford meanwhile requested a $9bn (£6bn) bridging loan, which it hopes it will not need.
Chrysler sought $7bn to survive the dramatic slump in sales that has decimated its cash reserves.
In its submission, GM said that, if the loan was granted, it would draw on $4bn this month before beginning repayments in 2011.In its submission, GM said that, if the loan was granted, it would draw on $4bn this month before beginning repayments in 2011.
It said it would continue its efforts to develop more fuel efficient vehicles, including an investment of $2.9bn in alternative fuels, and cut costs, levels of debt and top executives' pay.
GM pledged to reduce its chief executive Rick Wagoner's pay to just one dollar a year.
Ford made a similar pledge, but only should it need to call on the emergency loan.
It also said it would sell its five corporate jets as part of its cost-cutting plan.
Other measures could include selling some businesses, such as Swedish carmaker Volvo.
Ford also said a $14bn investment was needed in new technologies in the next seven years in order to improve fuel efficiency.
Every manufacturer is posting awful numbers and we are no exception Mark LeNeve, vice president, GM North AmericaEvery manufacturer is posting awful numbers and we are no exception Mark LeNeve, vice president, GM North America
"Ford is asking for access to up to $9bn in bridge financing, but reiterated that it hopes to complete its transformation without accessing the loan should Congress agree to make the funds available," the carmaker said in a statement ahead of a hearing in Congress. It said it would continue its efforts to develop more fuel-efficient vehicles - including an investment of $2.9bn in alternative fuels - and cut costs, levels of debt and top executives' pay.
Ford said it expected to return to profit, or at least break even, by 2011. This would include reducing its workforce considerably by 2012.
GM also pledged to reduce its chief executive Rick Wagoner's annual salary to just $1.
Ford boss Alan Mullaly made a similar pledge, but only should it need to call on the emergency loan.
Ford also said it would sell its five corporate jets as part of its cost-cutting plan, and proposed other measures including selling some businesses, such as Swedish carmaker Volvo.
It said a $14bn investment was needed in new technologies in the next seven years in order to improve fuel efficiency.
"Ford is asking for access to up to $9bn in bridge financing, but reiterated that it hopes to complete its transformation without accessing the loan should Congress agree to make the funds available," the carmaker said in a statement.
It added that it expected to return to profit, or at least break even, by 2011.
Tough taskTough task
The poor sales figures have highlighted what a tough task this will be. Ford sold 31% fewer light vehicles in November than it did in the same month last year. Analysts say the poor sales figures have highlighted what a tough task this will be.
GM suffered a 41% drop in sales for the month, while Chrysler fared worse still, with sales plunging 47%. "Every manufacturer is posting awful numbers and we are no exception," said Mark LeNeve of GM North America.
"Every manufacturer is posting awful numbers and we are no exception," said Mark LeNeve at GM North America. Swedish government has ruled out a takeover of Volvo if Ford sells it
Indeed, Honda's year-on-year US sales fell by 32% in November, while Toyota's fell by 34%.Indeed, Honda's year-on-year US sales fell by 32% in November, while Toyota's fell by 34%.
"The consumer is scared and sitting on the sideline. We need appropriate economic stimulus to get the consumer back in the game," Mr LeNeve added."The consumer is scared and sitting on the sideline. We need appropriate economic stimulus to get the consumer back in the game," Mr LeNeve added.
But the White House has already expressed scepticism about the bail-out plans. But the White House has already expressed scepticism about the bail-out proposals.
"We are sticking to our guns that the companies have to prove that they are viable before taxpayer dollars should be given to them," said White House spokeswoman Dana Perino. "We are sticking to our guns that the companies have to prove that they are viable before taxpayer dollars should be given to them," said White House press secretary Dana Perino.
And the Swedish government has ruled out a takeover of Volvo if Ford is unable to sell it.And the Swedish government has ruled out a takeover of Volvo if Ford is unable to sell it.
Avoiding criticismAvoiding criticism
The company's heads decided not to use private jets to get to Washington this time to avoid criticism. The heads of all three companies decided not to use private jets to travel to Washington for their presentations to avoid public criticism.
Mr Wagoner and Ford chief executive Alan Mulally are both said to have driven one of their own companies' hybrid cars from Detroit, while Chrysler boss Bob Nardelli has said he will not use a corporate jet. Mr Wagoner and Mr Mulally are both said to have driven one of their own companies' hybrid cars from Detroit, while Chrysler boss Bob Nardelli said he would not use a corporate jet.
GM has warned it could run out of cash in a matter of weeks and cannot wait until President-elect Barack Obama - who may be more sympathetic to industry pleas - is sworn in in January. GM has warned it could run out of cash in a matter of weeks and cannot wait until President-elect Barack Obama - who may be more sympathetic to industry pleas - takes office in in January.
The company was left with $16bn in cash at the end of September after losing $6.9bn in the previous three months. The company was left with $16bn in cash at the end of September after losing $6.9bn during the previous three months.
But Republican critics and some Democrats say the financial crisis is not the only reason why the biggest US carmakers are in trouble.But Republican critics and some Democrats say the financial crisis is not the only reason why the biggest US carmakers are in trouble.
They say that the Ford, GM and Chrysler's production was inefficient, and that their labour costs were higher than many of their foreign rivals. They say that the Ford, GM and Chrysler's production is inefficient, and that their labour costs are higher than many of their foreign rivals.
Other critics want to make sure that the Detroit automakers adopt more environmentally friendly policies, including strict fuel efficiency targets, in return for government aid. Other critics want to make sure that the Detroit Three adopt more environmentally friendly policies, including strict fuel efficiency targets, in return for government aid.
The union representing the autoworkers, the UAW, is reportedly considering renegotiating their union contracts. The United Auto Workers (UAW) union is reportedly considering renegotiating their members' contracts.
Two Congresses Green credits
Most analysts think that GM is "too big to fail", while Chrysler is the most vulnerable of the Detroit Three and might be forced into a partnership with stronger rivals. Most analysts think that GM is "too big to fail", while Chrysler is the most vulnerable of the three companies and might be forced into a partnership with a stronger rival.
The three carmakers Tuesday's presentations precede hearings in Congress later this week. Their presentations on Tuesday precede hearings in Congress later this week.
According to sources familiar with the carmakers' plans and statements from the companies, GM may consider selling off its Pontiac, Saab and Saturn brands, while Ford could sell off its Volvo luxury brand. According to sources familiar with GM's proposal, the carmaker may consider selling off its Pontiac, Saab and Saturn brands.
They may also move to consolidate their sprawling dealer networks. Correspondents say it is unclear whether Congress could vote on the bail-out proposals. It could instead delay consideration until the new House of Representatives, with a much bigger Democratic majority, takes office on 6 January.
The lame-duck Congress could vote on a bail-out plan, or could delay consideration until the new Congress, with a much bigger Democratic majority, takes office on 6 January.
The Bush administration has offered to accelerate the payment of some $25bn in green investment credits already allocated to the car industry, but this has been opposed by Democrats in the House of Representatives.The Bush administration has offered to accelerate the payment of some $25bn in green investment credits already allocated to the car industry, but this has been opposed by Democrats in the House of Representatives.