Car manufacturers General Motors and Chrysler have requested nearly $22 billion in additional US government loans and said they had reached tentative deals with unions to reduce labour costs.
The two motor manufacturers, which have so far received $17.4 billion in loans from the US Treasury, also detailed plans to cut jobs and idle plants as part of sweeping restructuring plans submitted under the terms of their federal bailout.
GM said it was making progress on complex deals to reduce some $48 billion in debt owed to bondholders and the United Auto Workers union (UAW) but had fallen short of an initial requirement to complete those agreements by yesterday's deadline for submitting the plans to US officials.
"The president's team will be reviewing these reports closely in the days ahead," White House spokesman Robert Gibbs said in a statement. "It is clear that going forward, more will be required from everyone involved.
GM is seeking an additional $16.6 billion from the US Treasury -- for a total of up to $30 billion in loans -- and said it would run out of cash as soon as March without new federal funding.
In addition, GM said it expected to be able to borrow up to $6 billion from foreign governments and nearly $8 billion from the US Department of Energy. It warned that without $1.5 billion from asset sales in 2009 it would need even more cash.
The deepening financial problems for GM and Chrysler present the Obama administration with a tough call.
Pushing the companies into bankruptcy would cost tens of thousands of jobs just as the White House is aiming to head off a deeper recession. But the price tag for saving GM and Chrysler has now ballooned to $39 billion at a time when Republicans are challenging plans for stepped-up spending and increased debt.
At the request of the Obama administration, GM and Chrysler prepared projections claiming the cost to the government of financing a bankruptcy of both could near $125 billion.
Chrysler CEO Bob Nardelli said the car maker's request for $9 billion in loans amounted to about $70 per taxpayer.
If Chrysler were forced to liquidate, the government would have to cover pension and other costs and the bailout tab could hit $1,200 per taxpayer, he said.
Chrysler sought an additional $5 billion, on top of the $4 billion in US loans it has already been granted, saying it expected the brutal downturn in the US market to run another three years.
Each company separately reached a tentative deal with the UAW expected to bring labour costs in line with Japanese automakers operating in the United States. That deal is subject to ratification by some 91,000 hourly workers. Details were not disclosed.
GM shares dropped 13 per cent yesterday to $2.18. Analysts said the recent showdown between GM, its bondholders and the UAW underscored the risk of bankruptcy for a company once seen as an icon of American economic strength.
GM and advisers to bondholders representing over $27 billion in debt have exchanged proposals to reduce that debt in an equity swap, documents submitted to the government show.
Bondholders face US government pressure to swap their debt for compensation equal to roughly one-third of the amount they are owed. Advisers to the creditors have given GM a proposal designed to maximize participation in the equity swap, both sides said.
The UAW is under pressure to take almost $15 billion in equity in GM and Chrysler rather than cash under a commitment to fund retiree health care.
GM said both deals must be completed by the end of March, the next deadline for the companies to prove they can be viable.
In response to signs of a prolonged slump in demand, GM said it would step up cost-cutting, eliminating 47,000 jobs this year and a total of 14 US plants by 2012.
Chrysler, meanwhile, will reduce capacity by 100,000 units and cut 3,000 jobs this year.
Reuters