DETROIT (Reuters) - General Motors Corp (GM.N) warned the U.S. government on Tuesday that it needs a $4 billion loan by the end of December or else it faces the risk of immediate failure.
“The first $4 billion is crucial,” GM’s Chief Operating Officer Fritz Henderson said. “There is no Plan B.”
The loan would be part of $18 billion in federal aid being requested by the company. GM said it needs another $8 billion by March, and a $6 billion credit line that would be available until 2012 in case U.S. auto sales drop beyond its expectations.
The stark admission that GM could fail came as the company presented a turnaround plan that had been demanded by lawmakers as a condition of reopening the debate about financial assistance for Detroit automakers GM, Ford and Chrysler.
In exchange for government funding, GM said it would undertake a sweeping restructuring, pushing its major union, dealers and creditors to accept the kinds of cost-saving contract changes that companies typically seek in bankruptcy.
GM, which has cut costs for nearly four years as U.S. sales declined, said it was prepared to cut jobs, dealers and brands. It said it would try to sell Saab, phase out its mass-market Pontiac brand and talk to Saturn dealers about discontinuing that brand.
With Hummer already being shopped, that would leave GM with the more profitable Chevrolet, Cadillac, Buick and GMC brands, and a more focused strategy.
GM said it would look to reduce its debt by almost $36 billion by asking bond holders to swap out of existing debt, and that it would negotiate new terms for its planned $21 billion contribution to a health care trust fund run by the United Auto Workers union. In so doing, GM plans to cut its debt to $30 billion, Henderson said.
“The plan is intended to accomplish what would otherwise be achieved by a bankruptcy filing,” he told reporters. “It is not our plan to resort to the bankruptcy court.”
GM sales fell 41 percent in November, and the automaker said publicity about its request for a federal bailout had hurt showroom sales.
The automaker said it planned to cut up to 31,000 jobs from its U.S. work force by 2012 and that it would ask the UAW to renegotiate terms of a contract it reached in 2007 in order to close 9 more plants and bring in lower-cost workers.
Those steps will make GM’s hourly labor costs competitive with the likes of Toyota Motor Co’s (7203.T) nonunion U.S. work force by 2012, GM said.
GM Chief Executive Rick Wagoner, along with the CEOs of Ford Motor Co (F.N) and Chrysler LLC CBS.UL, was blasted by lawmakers for flying private jets to Washington last month to ask the government for a bailout.
GM said it would stop running a corporate jet service and sell or transfer its remaining jets. In addition, Wagoner will work for $1 in 2009 and will not receive a bonus for 2008 or 2009, the company said. Other senior executives would take pay cuts under the plan.
GM has been criticized for paying its executives more than $40 million in 2007, when its stock dropped $19 percent and it lost $39 billion.
Taken together, the three Detroit automakers have asked Congress for $34 billion in emergency loans and credit lines.
Reporting by Kevin Krolicki; Editing by Phil Berlowitz, Toni Reinhold