By Bill Vlasic and Nick Bunkley International Herald Tribune February 17, 2009
DETROIT: With its access to a government lifeline in the balance, General Motors was locked in intense negotiations on Monday with the United Automobile Workers union over ways to cut its bills for retiree health care.
Both GM and its rival, Chrysler, are racing to file restructuring plans with the Treasury Department by the deadline Tuesday. The companies must show progress in cutting long-term costs as a condition for keeping loans they have received from the U.S. government.
For GM, the restructuring will be the largest in its 100-year history, the next step in justifying its $13.4-billion loan package from the U.S. government.
The plan will outline in great detail, as much as 900 pages, how GM will cut its work force, downsize its North American factories and reduce its brand lineup to four from eight.
But GM's plan to shrink will not mean much without an agreement with the UAW
On Monday, GM pressed union leaders in a meeting in Detroit for a deal on financing what was the centerpiece of the 2007 UAW contract - a perpetual, GM-financed trust to cover health care for hundreds of thousands of retired hourly workers and their spouses.
Talks are also continuing between the UAW and Ford and Chrysler, but primarily at GM, where the question of how a company that lost more than $20 billion last year can afford $5 billion a year in medical bills.
GM's directors were scheduled to meet Monday by teleconference to review that company's plan, though it was not expected to be completed until late Tuesday.
Meanwhile, President Barack Obama was preparing to establish a special committee of this most senior economic advisers to oversee GM and Chrysler, which are borrowing at least $17.4 billion. Obama has dropped the idea of appointing a single, powerful "car czar" to handle the politically delicate task, as executives at the carmakers were expecting, a top administration official said Sunday night.
Obama is designating the Treasury secretary, Timothy Geithner, and the chairman of the National Economic Council, Lawrence Summers, to oversee the panel. Geithner will also supervise the loan agreements already in place with GM and Chrysler, said the official, who insisted on anonymity.
The official also said that Ron Bloom, a restructuring specialist who has advised labor unions in the troubled steel and airline industries, would be named a senior adviser to Treasury on the auto crisis.
It is unclear exactly when on Tuesday the companies would file their plans with the Treasury, which will then release them publicly, though GM is not expected to make its submission until after the New York stock markets close at 4 p.m.
Chrysler is expected to file a plan with two possible futures: one includes a partnership with the Italian carmaker Fiat and an alternative counts on the company making alliances and partnerships with other automakers, a person with knowledge of the company's intentions said. Chrysler announced this month that it had reached a nonbinding, noncash agreement with Fiat that would allow it to build more fuel-efficient vehicles in the United States and give Fiat at least a 35 percent stake in Chrysler.
The administration official said the president was reserving for himself any decision on the viability of GM and Chrysler, both of which came close to bankruptcy before receiving U.S. government aid two months ago.
One of Obama's top advisers said Sunday that the administration had not ruled out a government-backed bankruptcy as a means to overhaul the automakers.
"We're going to need a restructuring of these companies," the adviser, David Axelrod, said on "Meet the Press" on NBC. He added that a turnaround of the companies would "require sacrifice not just from the autoworkers but also from creditors, from shareholders and the executives who run the company."
The automakers had been expecting the appointment of a car czar to break the logjam of negotiations with the United Automobile Workers over the finances of a retiree health care trust, and with bondholders about reducing the companies' debt.
Bloom is known for bringing his Wall Street experience as an investment banker to an advisory role as the "in-house" banker for the steelworkers' union. With the auto union locking horns with bondholders in the GM revamping deliberations, Bloom appears to bring credibility with both the union and the debtors. Bloom could not be reached for comment Sunday night.
Another senior administration official said that Obama had considered appointing a car czar, and among those considered for the job was the private equity executive Steven Rattner. It was not clear why the administration changed course or whether Rattner would have a role on the task force.
The panel, called the Presidential Task Force on Autos, will draw officials from several agencies including the departments of Treasury, labor, transportation, commerce and energy, according to the administration official.
Many members of the task force have already been working closely with GM and Chrysler on the viability plans they are preparing for the government.
GM and Chrysler are both expected to request more loans to stay solvent during what is shaping up as another miserable year for auto sales.
Chrysler's chairman, Robert Nardelli , has said his company needed another $3 billion in addition to the $4 billion loan it received in January.
GM originally asked for $18 billion in aid in December. GM has borrowed $9.4 billion so far and is scheduled to receive another $4 billion, if the Treasury is satisfied with its revamping plan.
GM said in a statement that it welcomed the new task force and that it looked forward to sharing its plan "to restore our company to viability and to meet the requirements of its loan agreements."
The administration official who disclosed the change in Obama's plans for oversight of the auto industry said the group would review the companies' submissions for a week or two before responding publicly. Until then, the automakers are expected to continue talks with the union and other stakeholders.
GM and the UAW resumed their discussions on Sunday afternoon, a day after the UAW walked away from the bargaining table as the two sides clashed over how to cover retiree health care costs. A person with knowledge of the talks characterized them as "intense" but did not indicate that an agreement was imminent Monday.
UAW leaders in December agreed to help the automakers by delaying when the companies were required to make multibillion-dollar payments into a new trust fund intended to pay for retiree health coverage.
Unlike GM and Chrysler, Ford does not face a deadline Tuesday. But Ford, which lost $14.6 billion in 2008, the most in its history, is expected to ask the UAW for whatever concessions are granted to GM and Chrysler.
GM and Chrysler recently extended buyout and early retirement offers to nearly all of their 90,600 hourly workers as they tried to eliminate factory jobs and replace older workers making about $28 an hour with new hires who can be paid half as much.
GM announced plans last week to cut 10,000 white-collar jobs worldwide, including 3,400 in the United States. It said that salaries for those who remain on staff would be cut by as much as 10 percent through at least the end of 2009.
Over all, automakers are expected to sell between 10 million and 11 million vehicles in the United States this year, far below the 16.2 million they sold in 2007. GM said last week that the two-year drop is roughly equal to the capacity of 24 assembly plants.
Micheline Maynard contributed reporting from Detroit, and Jackie Calmes from Washington http://www.iht.com/articles/2009/02/17/business/17auto.php
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