US may seek more automaker concessions
DETROIT - The Obama administration is likely to demand deeper concessions on Chrysler LLC and General Motors Corp. in exchange for additional federal loans, a person briefed on the government's plan said yesterday.
The concessions could go beyond the requirements imposed by the Bush administration when it agreed to loan the automakers money last year, said the person, who asked not to be identified because the government's plans have not been revealed.
President Obama will reveal the administration's plan for the auto industry on Monday. White House press secretary Robert Gibbs said Obama's auto task force was "winding down the decisions that have to be made" and finalizing the plan.
Both automakers are operating on a total of $17.4 billion in government loans, trying to weather the worst auto sales downturn in 27 years. In addition, GM is seeking another $16.6 billion, while Chrysler wants $5 billion more.
General Motors chief executive Rick Wagoner met with members of the task force yesterday, an Obama administration official said.
The term sheets that came with the first loans require extensive restructuring, including executive pay cuts and labor costs that match Japanese automakers. Both companies also must persuade the United Auto Workers to take equity in exchange for half of the payments the companies must make to union-run trust funds that will take over retiree healthcare costs next year. And they must get debtholders to swap equity for two-thirds of the companies' debt.
Both companies face a Tuesday deadline to turn in finished restructuring plans to the government, but neither company is likely to have everything done. Neither GM nor Chrysler have deals with the union on the trust funding or concessions from their debtholders, although talks are continuing.
"Our union is continuing to work with the task force and the auto companies to find a solution to the may issues we face," UAW president Ron Gettelfinger said yesterday via a spokeswoman.
The government can recall its loans to GM and Chrysler if they fail to sign deals for debt restructuring and other concessions from stakeholders, including the UAW, by Tuesday. But the administration has not indicated it plans to do so.
GM owes roughly $28 billion to bondholders and about $20 billion to its retiree healthcare trust. Chrysler owes about $7 billion in first- and second-term debt, mainly to banks, and $10.6 billion to its retiree health trust.