Democrats: US carmakers must make "tough decisions"
WASHINGTON (Reuters) - General Motors Corp and Chrysler LLC must show in their turnaround plans next week that they are willing to "make the tough decisions" on debt restructuring, fuel efficiency and other issues, U.S. House Speaker Nancy Pelosi said on Friday.
Pelosi and House Financial Services Committee Chairman Barney Frank said in a joint letter to each company that despite recession and other national economic hardship, GM and Chrysler still had a high bar to meet by the end of March if they expect continued government support for their businesses.
"We trust that your restructuring plan will demonstrate to the world that you are willing to make the tough decisions that modernize your operations, restructure your debt, enhance your competitive status in the global marketplace, and protect American jobs for the future," Pelosi of California and Frank of Massachusetts wrote.
The White House and the Treasury Department granted GM and Chrysler a $17.4 billion bailout in December after both warned of potential near-term collapse without government help.
The Bush administration required them to submit separate restructuring proposals by February 17 and demonstrate a path to financial viability by March 31.
The Obama administration could order one or both to immediately repay the money -- $9.4 billion in loans paid so far to GM and $4 billion to Chrysler -- if their commercial prospects were deemed inadequate.
"We intend to deliver a detailed plan that restores GM to viability and meets the requirements of the U.S. Treasury loan agreement," said GM spokesman Greg Martin.
Chrysler, which is seeking another $3 billion, also said it has a strategy for viability and would meet the government's Tuesday deadline to submit materials to Treasury officials.
The letter outlined other restructuring requirements:
* Debt restructuring that protects taxpayers' interest
* A commitment that sacrifices "will be shared equitably" by all stakeholders
* an ability to meet California's tougher emissions law
Both companies, according to industry officials and lawmakers, plan to submit proposals that would address restructuring scenarios tied to overall industry health.
GM, Chrysler, controlled by private equity firm Cerberus Capital Management , and Ford Motor Co are reeling from plunging industry sales, which hit a 27-year low in January. Foreign rivals are also scaling back operations and cutting costs in response to contracting demand.
GM, which could tap another $4 billion in bailout funds, and Chrysler are talking with debt holders, suppliers, unions, and dealers to win concessions and revamp their businesses.
While the two say they are making progress, there is little expectation GM and Chrysler will strike any significant agreements before Tuesday.
A senior Chrysler executive said in an interview with Reuters on Friday that the company is "fully engaged" with stakeholders and "feels good about what we've accomplished to this point" on cost and capacity reductions as well as efforts on the turnaround plan.
The official said Chrysler would present a two track plan -- one that would outline its strategy as a stand-alone entity and a second that would incorporate alliances.
Chrysler's plan would have it viable even if U.S. auto sales stay at depressed levels for four years, Vice Chairman Jim Press said on Thursday in Chicago.
Chrysler has announced a nonbinding agreement for an alliance with Italy's Fiat to bring small cars to the United States and open international markets to Chrysler.
But a separate possibility slowed this week. Both Japan's Nissan Motor Co and Chrysler have said they had halted work on a product-based tie-up while they review projected financial returns.
Other members of Congress expect next week will be the moment when GM and Chrysler formally introduce themselves and the bailout issue to the Obama administration, which consulted on the rescue with Bush officials.
"I doubt there is going to be very specific information because there's no "car czar," for instance," said Sen. Carl Levin, Democrat of Michigan. "I expect there will be some sort of outline or directions."
The "car czar" is a trustee expected to be appointed by the Obama administration to oversee restructuring. Congressional and other sources with knowledge of the matter believe the White House plans to introduce a team of experts to review financial, labor and product issues.
The Treasury has retained legal experts with bankruptcy experience. Some outside analysts argue that without the threat of Chapter 11 reorganization, the companies lack the leverage to extract deep concessions.
- Tweet this
- Share this
- Digg this
- Tesco accounting black hole deepens, chairman to step down |
- 'We won't pay,' furious Cameron tells EU over surprise bill |
- TLC cancels reality TV programme 'Here Comes Honey Boo Boo'
- UPDATE 3-Tennis-WTA Finals women's singles round robin results
- Iraqi security forces and Kurds gain ground against Islamic State