US carmakers ask for $34bn

US carmakers ask for $34bn
By Bernard Simon in Toronto and John Reed in London
Copyright The Financial Times Limited 2008
Published: December 2 2008 19:59 | Last updated: December 3 2008 02:01


Detroit’s beleaguered carmakers sought to present themselves as lean, innovative and environmentally aware as they appealed to Congress for up to $34bn in emergency loans on Tuesday.

In a second appeal to Washington in a month, General Motors, Ford Motor and Chrysler set out plans to become more competitive, stressing attempts to transform themselves from high-cost behemoths focused on gas-guzzling sports-utility vehicles.

“As a company and as an industry, we readily admit that we have made our share of mistakes and miscalculations,” Ford said in a 36-page plan submitted to Congress. But, it added, “we recognised that our business model needed to change, and we are changing it”.

GM said it would ask Congress for $12bn in bridging loans, of which $4bn is urgently needed by the end of December before the company runs out of cash, as well as a $6bn line of credit “to provide liquidity should a severe market downturn persist”.

Ford has asked for access to up to $9bn, and Chrysler $7bn.

After being lambasted by critics last month for arriving in Washington on corporate jets, Ford and GM on Tuesday vowed to sell their corporate aircraft.

Rick Wagoner, GM’s chief executive and Alan Mulally, his Ford counterpart, said they would be willing to draw a $1 salary. Mr Mulally’s offer is conditional on Ford drawing its proposed $9bn share of the bridging finance.

Mr Mulally, Mr Wagoner and Chrysler’s chief, Bob Nardelli, all plan to drive to Washington in hybrid cars to appear before Congress on Thursday and Friday.

Data published on Tuesday showed another slump in the US car market, with all six leading companies reporting year-on-year declines of more than 30 per cent in November.

GM ascribed part of its 41 per cent slide to widespread speculation that it might be forced to file for bankruptcy. Ford set a 2011 target for breaking even or returning to profitability, on a pre-tax basis, in its submission. Earlier this year, it abandoned its target of returning to profitability by 2009.

In an accelerated drive to produce more fuel-efficient vehicles, Ford announced plans to develop a battery-powered van by 2010 and an electric saloon by 2011.

GM aims to offer 15 hybrid models by 2012.

Democratic lawmakers in particular are expected to demand stronger commitments by Detroit to make cleaner cars as a quid pro quo for any federal aid.

However, Ford cautioned that “transforming our industry will require the shared sacrifice of many stakeholders and we will be asking our employees, dealers, and others to make changes”.

It said it was in talks with the United Auto Workers union with the goal of bringing its labour costs down to the same level as foreign rivals’ US plants, which are not unionised.