Washington: December 3, 2008 – IR Summary/NYT -  General Motors, the world’s largest automaker, admitted that they are in such a depressed position  that it has no other option but to cut jobs, factories, brands and executive pay as part of its plea to get $12 billion in federal loans and an additional $6 billion line of credit with additional promise that it could be competitive on labor costs with Toyota by 2012. 

On the same day that the industry reported its worst sales month in 26 years, the three Detroit automakers delivered new business plans to lawmakers in the hope of winning support for $34 billion in federal loans.

While the timing was coincidental, the dismal November sales report underscored the perilous financial condition of G.M., the Ford Motor Company and Chrysler.
Their combined loan request was substantially higher than the $25 billion that the three companies had initially hoped to get from Congress two weeks ago.

The House speaker, Nancy Pelosi, said on Tuesday that she had spoken with President Bush by phone on Monday about the need to help the auto industry and that she believed some sort of rescue would be provided, either legislatively or by the Bush administration.

“I think it’s pretty clear that bankruptcy is not an option,” Ms. Pelosi said. But she said that the companies’ revamping plans must first pass muster among skeptical lawmakers who sent executives of the Big Three home from Washington empty-handed last month.

G.M.’s president, Frederick A. Henderson, said the company would be insolvent if it did not receive federal assistance, including an infusion of $4 billion in cash before the end of the year.

“Absent support, frankly the company simply can’t fund its operations,” Mr. Henderson said in a call with reporters.

Chrysler, the smallest of the Detroit companies, is in similar difficulty, and asked Congress for a $7 billion loan before the end of December to ward off a potential bankruptcy.

Ford said in its plan that it could survive through 2009 with its current cash levels and by tapping its credit line with private banks, and that it could return to profitability by 2011. Even though it is better prepared for the downturn, Ford said it wanted $9 billion in loans to draw upon if necessary.

Ford’s chief executive, Alan R. Mulally, said the prospect of a failure of G.M. would cascade through the entire domestic auto industry and put millions of jobs at risk.
“We are very, very concerned, and that’s why we went with G.M. and Chrysler to Congress even though we think we have sufficient liquidity,” he said in an interview.
Mr. Mulally will appear at Congressional hearings Thursday and Friday in Washington along with Rick Wagoner, G.M.’s chairman, and Robert L. Nardelli, Chrysler’s chairman.

Together, they will try to persuade lawmakers to act quickly on the loan requests at a special lame-duck session of Congress next week.

There is only a narrow window for Congress to settle on any aid package for the automakers. Democratic leaders have said that they will not let the debate become a prolonged procedural fight, and they have little interest in keeping lawmakers in town past next Friday.

Senior Democratic aides say that if a deal cannot be sealed by then, they have little choice but to wait until after the new Congress is sworn in and, if there are still disagreements with the Bush administration, until after Barack Obama’s inauguration.

Congressional leaders were still reviewing the plans Tuesday. Ms. Pelosi said the companies had clear benchmarks that they needed to meet.

“We want to see a commitment to the future,” she said. “We want to see a restructuring of the approach, that they have a new business model, a new business plan. There has to be compensation reform.”

The White House so far has resisted calls for any new taxpayer aid for the automobile industry but instead has pushed for Congressional action to speed up $25 billion in federally subsidized loans that were authorized in an energy bill last year to encourage advanced fuel efficiency. More