Fallout: The Financial Crisis

Carmakers seek more aid, turn in plans

John Dimsdale Feb 17, 2009
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Fallout: The Financial Crisis

Carmakers seek more aid, turn in plans

John Dimsdale Feb 17, 2009
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TEXT OF INTERVIEW

KAI RYSSDAL: By the looks of it, today could not have come soon enough for what is left of the American auto industry. General Motors and Chrysler turned in their restructuring plans to the Treasury Department today. These are the plans that were required as part of the $17.5 billion bailout that Detroit got just before Christmas. Marketplace’s Washington bureau chief John Dimsdale’s here to tell us those loans, it looks like, were just a down payment. Hello John.

JOHN DIMSDALE: Hello Kai.

RYSSDAL: Alright, so what do we know now that we didn’t know a couple of hours ago?

DIMSDALE: Well GM says it will need as much as another $17 billion, and that’s on top of the thirteen that the company’s already received from the government. It’s going to cut 47,000 jobs around the world, get rid of dealerships and close at least four more factories.

Chrysler raised it’s bailout request from four to $9 billion. It’s lowering its expected sales for this year and in the future. Chrysler will cut 3,000 more jobs this year, and that’s after more than 30,000 layoffs last year.

In announcing the details of GM’s restructuring plans, CEO Rick Wagner said the global economy continues to take a toll on the company’s finances.

RICK WAGONER: In the 11 weeks since our initial plan was filed with Congress, the condition of the U.S. and global economies as well as the industries, auto industries, has significantly deteriorated.

RYSSDAL: John, did Wagoner say anything about cutting more brands from GM? They’ve got about a million of them.

DIMSDALE: They did. They did. They’re going to cut at least four of them. They will sell Hummer, if they can find a buyer. Otherwise that’s going to be shut down. The same with Saab. Although Saab has the option of filing for bankruptcy in Sweden. There’s been some interest from the Swedish government in propping Saab up. Saturn will continue to operate with its current line of cars, but there won’t be any new models and Wagner said that it will be closed down in 2012.

RICK WAGONER: In the interim, should Saturn retailers as a group or other investors present a plan that would allow a spin off or sale of the Saturn Distribution Corporation we would be open to such a possibility. If a spin off or sale does not occur, we plan to faze out the Saturn brand at the end of the current product’s life cycle.

RYSSDAL: Did he mention anything, John, about GM just declaring bankruptcy and being done with it?

DIMSDALE: You know, the industry very much wants to avoid bankruptcy although there is a growing acceptance of reorganizing under bankruptcy protection, at least in the government. You know, in reorganization the company’s debts, the costs, they can all be sorted out and reorganized and separated from the good parts of the company. The companies would come out of bankruptcy leaner and cleaner. Conceivably, a huge cost to the government there in terms of taking over the pensions and health care insurance premiums for retirees. But the companies say, you know, ‘We’re concerned that bankruptcy will scare our customers away.’ But the government’s going to say, ‘well it’s happened with other industries.’ Companies have emerged successfully from bankruptcy. If people just have confidence in your warranties there would be more acceptance of bankruptcy as a solution for the car industry.

RYSSDAL: Very quickly John, before we go, now what happens? They have this request in, they’re not getting a check tomorrow are they?

DIMSDALE: No. The White House Task Force on Autos takes a look at these plans and decides whether to go forward with the extra bailout money. And the companies will have to start paying them back, paying back these loans, starting in 2012.

RYSSDAL: John Dimsdale in Washington D.C. Thanks John.

DIMSDALE: Thank you Kai.

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