GM chief says he's confident on loans
Rick Wagoner says the struggling automaker can bounce back after receiving the federal bailout.
DETROIT - General Motors Corp. chief executive officer Rick Wagoner said that the automaker had significant work ahead after receiving a federal bailout yesterday but that he was confident GM would work with employees, suppliers and other stakeholders to make the company viable.
Wagoner said at a news conference that the company was confident it would not need more than it had requested from the government to cover the worst-case scenario as it tries to ride out the worst auto sales slump in more than 26 years.
President Bush's administration yesterday granted $17.4 billion in loans to GM and Chrysler L.L.C., both of which had said they would not be able to pay their bills next month without government help.
GM would get $13.4 billion of that money, including $9.4 billion in December and January, and $4 billion contingent upon release of the second half of the $700 billion Wall Street bailout plan. Chrysler would get $4 billion.
Meanwhile, Chrysler's owner said yesterday that it would invest the first $2 billion of the profits from the company's financing unit in the automaker.
Cerberus Capital Management L.L.C. said that money would be used with the $4 billion government loan.
But Cerberus said Chrysler's that labor costs must be cut to the level of its foreign competitors' and that its debt must be restructured.
GM has requested $18 billion in government loans, and Wagoner said that request came from a conservative plan. The $13.4 billion granted by the Bush administration is "consistent with what we asked for in our downside case through March," Wagoner said.
But the company's worst-case scenario submitted to Congress says it will need the $18 billion, leaving open the possibility of returning to the Obama administration for more money.
Wagoner would say only that the loans granted by Bush were enough to get through March.
"Beyond that, we'll have to see how it develops," he said.
Under the Bush plan, the company will have to get significant concessions from creditors and the United Auto Workers, all while moving toward proving its viability by March 31.
GM president and chief operating officer Fritz Henderson said the company already had closed "a significant gap" between its wages and those at foreign carmaker plants in the U.S., but it did not say what kind of concessions it would seek from the union.
GM chief financial officer Ray Young said GM expects to have the first money from the government by Dec. 29, just in time to pay suppliers.
The deal also calls for two-thirds of the automakers' bonds to be converted to stock in the companies. Talks with bondholders have been infrequent in recent weeks but are expected to pick up to hammer out concessions, Wagoner said.