Retired pensioners must be very nervous about their future. For even if GM survives bankruptcy, they might still have to abandon health and retirement benefits altogether to survive as an operating company. Maybe those who recommend a diversified retirement portfolio were right after all. Fritz Henderson, chief executive of General Motors, at a press conference on Monday at GM world headquarters in Detroit.
Ford Motor Company is the only major U.S. automaker surviving without federal aid even though they lost a record $14.7 billion last year. The company borrowed $23 billion in 2006 to forgo the U.S. bailouts GM and Chrysler received.
G.M. is eliminating another 21,000 factory jobs, closing 13 plants, cutting its network of 6,500 dealers almost in half and closing its Pontiac division. It will be a company one tenth its size at 38,000 union workers from its heyday in 1970 when 395,000 worked at 150 plants. G.M. is currently subsisting on $15.4 billion in federal loans and Chrysler on $4 billion. G.M. is still negotiating with the United Automobile Workers (UAW) union and the government wants the union to accept company stock to finance half of G.M.’s $20 billion obligation for retiree health care.
The U.A.W. agreed to a similar health care deal with Chrysler, which has borrowed $4 billion from the government and hopes to get $6 billion more. The union’s new retiree health care trust would own a majority stake in Chrysler in exchange for helping the carmaker save $4.5 billion. It is being speculated that Fiat would ultimately own 35 percent and that 10 percent would be held by the government and Chrysler’s lenders. Chrysler will give the union a 55 percent ownership stake to cut its obligations to the health care trust in half. The deal suspends cost-of-living pay increases, limits overtime pay and reduces paid time off. It also provides for Fiat to begin building cars in at least one Chrysler plant.
G.M. and Chrysler have already received $27 billion in loans and want $21.6 billion in additional loans for a total of $39 billion in loans (does anybody think these loans can be paid back?). Another $5 billion in loans have already been approved for the financing arms of GM and Chrysler. Congress also approved funding last year for $25 billion in loans to help automakers convert their plants to produce more fuel efficient cars. And even more will be needed in federal bailout loans to keep these companies alive. Ford will be in line soon too. (NYT, 4/27/09, Bloomberg, 4/23/09, CNNMoney, 2/18/09, CNNMoney Chart)