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GM viability plan calls for $16.6 billion in additional aid, 47,000 job cuts

GM viability plan calls for $16.6 billion in additional aid, 47,000 job cuts

Viknesh Vijayenthiran

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The "New GM" is expected to emerge from bankruptcy in 60 to 90 days with 60.8% owned by the U.S. government

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Chrysler’s request for an additional $2 billion in government funded loans in its latest viability proposal looks trivial compared to the $16.6 billion requested by General Motors today in front of the U.S. Treasury. Without this funding GM says it could run out of money as early as next month but a number of drastic restructuring plans could help prolong this deadline.

This level of funding would increase GM’s burden to the government to $30 billion. The company received the last instalment of a previously approved $13.4 billion loan today, but is requesting another $4.6 billion to meet its December 2 request of $18 billion. It then will ask for another $4.5 billion to help it repay a revolving line of credit coming due in the fall of 2011. Finally, GM hopes to seek an additional $7.5 billion revolving line of credit to help it if auto sales worsen later this year or next year.

If successful, GM plans to start repaying the loans in 2012 and to heighten its chances of remaining viable the company promised to implement a number of major cost cutting measures. These include the elimination of more than 47,000 jobs by the end of the year and the shut-down of five U.S. plants by 2012. GM also said it may kill its Saturn brand in 2012 when the last model reaches the end of its product cycle.

The Hummer brand is still up for sale and GM insists that an outcome for it will come by the end of the first quarter. As for Saab, GM is still in negotiations with the Swedish government and several other parties.

Among other things, GM was told today to get creditors to accept stock in exchange for debt, and the companies were advised to trim worker compensation to the level of the U.S. plants of import brands, or explain how comparable savings would be achieved.

Both GM and Chrysler will find out the outcome of their latest viability plans at the end of March when the Obama administration will determine whether the companies have met the restructuring criteria. If not, the loans are to be recalled immediately.