A mere couple of months after their first handout, General Motors and Chrysler have come a calling again. Hat in hand, they now say it will take several billions more to keep them afloat. Go figure.
That has given the many critics of the first bailout a chance to let loose with a giant “I told you so” not long after the original deal was reached.
One of them is Alabama Senator Richard Shelby. He is the senior Republican on the banking committee.
Speaking about the auto bailout in December, Shelby told Fox News Sunday, “This is a bridge loan to nowhere. This is down payment on many billions to come.”
With that in mind, here’s a look the latest story out of Detroit.
From Bloomberg by John Hughes and Jeff Green entitled: GM Seeks Up to $16.6 Billion in Aid, 47,000 Job Cuts
“General Motors Corp. said it needs as much as $16.6 billion in new U.S. loans, more than doubling the aid to date, and must get some of the cash next month to survive. GM plans 47,000 more job cuts worldwide this year.
Chrysler LLC, propped up like GM with federal assistance, said it’s seeking $5 billion more from the government and will shed 3,000 more positions.
The automakers met a deadline today to report progress in revamping operations with $17.4 billion in loans granted so far, and now they must show the U.S. by March 31 that they can become profitable and be allowed to keep the money. Along with Ford Motor Co., they got a boost when the United Auto Workers said it reached tentative agreements to help trim labor expenses.
A request for more aid “was inevitable,” said Jim Hossack, an analyst at consulting firm AutoPacific Inc. in Tustin, California. “It’s because sales in January were less than anyone expected.”
GM’s retrenchment includes closing 5 more U.S. plants by 2012; selling or shutting down the Hummer unit by the end of next month; and chopping salaries by as much an additional 30 percent for the four-most senior officers after Chief Executive Officer Rick Wagoner, who already is working for $1 a year.
The biggest U.S. automaker said it examined three bankruptcy scenarios, with price tags of as much as $100 billion, and that all were less-favorable options than a rescue.
At least $9.1 billion more in loans is needed to finish restructuring, GM said, and that sum could rise to $16.6 billion should the economy worsen. Detroit-based GM has received $13.4 billion since December.
Chrysler said it needs an additional $5 billion March 31 after receiving an initial installment of $4 billion. The new job cuts at the third-largest U.S. automaker would be in addition to 32,000 shed through the end of last year.
The worst U.S. auto market since the early 1980s helped drag GM and Chrysler to the brink of collapse and now is hampering their recovery, with domestic sales last month plunging 49 percent at GM and 55 percent at Chrysler. Should the loans be recalled, the money could be used to force the companies into restructuring in bankruptcy.”
By the way, according to the Center for Automotive Research., there were enough automotive assembly plants in North America to churn out 18.3 million vehicles a year in 2008. Meanwhile, analysts estimate that consumers will only buy about 11 million vehicles this year.
That leaves the entire auto industry with nothing less than massive over capacity. In fact, at current sales levels, it would take 116 days to sell all the cars and trucks that are already backing up on lots across the country.
So bail out or not, it promises be a long road to recovery for the entire industry—-even the importers.
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