GM forgoes $2 billion in federal loans it doesn't need
General Motors announced today that it's taking a pass on $2 billion in loans that were previously requested last year for the month of March. The automaker cites "company-wide cost reduction efforts as well as pro-active deferrals of spending previously anticipated in January and February" as the reasons for why it's withdrawing the request for money. GM advised the President's Task Force on the Auto Industry of the development this week and revealed the news today at the bottom of a press release containing its statement on the Canadian Auto Workers union ratifying a new contract with concessions. The low key announcement is strange considering the good light in which the automaker will likely be cast for not taking money from the government that isn't needed. Ford, which was the only domestic automaker not to request government aid, has been enjoying that spot light for months.
We're not sure exactly how this affects GM's overall request for government aid, as the automaker revealed to the Treasury Department in its Viability Plan submitted on February 17th that it may need up to $16.6 billion more from the federal government in addition to the $13.4 billion that's already been approved. Though GM's decision to forego $2 billion for the month of March doesn't necessarily signal that the company is healthy and ready to go it alone, its demonstration of successful cost cutting and responsible spending will likely help ensure that the rest of the aid it requested is more easily approved.
[Source: General Motors]
PRESS RELEASE
GM Statement Regarding the Ratification of the CAW Agreement and Update on Cash position
Attributable to Ray G. Young, GM executive vice president and chief financial officer
As GM Canada announced last night, the members of the Canadian Auto Workers (CAW) union have ratified a new competitive agreement with GM Canada (GMCL), which is vital to the continued transformation of the Canadian operations. The agreement between GMCL and the CAW will quickly reduce costs in Canada by significantly closing the competitive gap with U.S. transplant automakers on active employee labor costs and substantially reducing GMCL's legacy costs by introducing cash contributions for health benefits, increasing employee health care cost sharing, freezing pension benefits and removing hourly pension cost of living adjustments.
In addition, GMCL and the CAW will work together with the Canadian government to explore the possibilities of adopting a similar approach to the GM UAW VEBA in the U.S. GM is also continuing its negotiations with the Canadian and Ontario governments for support for the Canadian operations during this unprecedented industry downturn.
In the U.S., GM has also indicated they have advised the Presidential Task Force on The Auto Industry that the $2 billion of funding previously requested for March would not be needed at this time. This development reflects the acceleration of GM's company-wide cost reduction efforts as well as pro-active deferrals of spending previously anticipated in January and February. GM will remain in regular contact with the Presidential Task Force on the Auto Industry on the status of GM's restructuring actions, its liquidity position, timing of future funding requests, and other relevant topics of mutual concern.
Reader Comments (Page 1 of 3)
Tang 2:14PM (3/12/2009)
Ah, the return of the bubble comics. Awesome. And great quotes.
Reply
KeatMP 5:04PM (3/12/2009)
+1
JimmyJimson 2:16PM (3/12/2009)
Good to hear, it's a step in the right direction.
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Tim 2:16PM (3/12/2009)
Next month they will ask for 4 billion instead of the 2. Doesn't matter its a Zombie automaker. Total bailout bill will be over 80 billion... easy.
Doesn't matter, college tuition goes higher, health care costs skyrocket but America knows where its priorities lie.
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Coolio 4:49PM (3/12/2009)
Tim - you fool !!!
Blame the import drivers who allow corporate profits to go to Asia for the rising tuition et al.
You don't need a PhD in economics to figures this out (although I do have one)...
MajorGeek 2:18PM (3/12/2009)
Did not see this one coming, now if we can get the rest of these large companies off the nipple maybe a recovery is coming.
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Sea Urchin 3:04PM (3/12/2009)
Well, if the nipple wasn't there in the first place we would have seen bad companies dead already and the recovery would have been on its way.
Nipples are BAD.
Franz 3:08PM (3/12/2009)
Hey... they're not all bad! :P
MajorGeek 3:18PM (3/12/2009)
^^^^^^
Mr.Oak 3:23PM (3/12/2009)
Nipple = 130,000 jobs @ AIG
Nipple = 3,000,000 jobs in the Auto Industry
Nipple = 100,000+ jobs @ Citi
Nipple = 60,000+ jobs @ WAMU
Nipple = 89,000+ jobs @ Wachovia
Lost Jobs = adding the numbers above to 5.3 million currently on unemployment.
Lost Jobs = Diminished Tax revenues
Lost Jobs = Move from Recession to Depression
Lost Jobs = More foreclosures.
More Foreclosures = Continued downward spiral in property values.
We could go on and on.
You have no skin in the game, so your opinions aren't worth much.
Len_A 3:31PM (3/12/2009)
@Mr.Oak - Very well said.
Mr.Oak 3:33PM (3/12/2009)
Hey wait, I have an idea, draft all of the 11,000,000 unemployed into the armed forces, and we could invade other countries and plunder their wealth. Look it worked in the past for the Europeans.
MajorGeek 3:37PM (3/12/2009)
No skin in the game? I pay plenty of taxes (business, multiple property and personal) more worried about if this will be paid back, most of the companies you mentioned are in bad shape. When the loans are not paid back, let me know. Waiting to see how printing money out and lowering the value of the dollar works out. Hoping for the best, but if someone is always there to bail you out, where the incentive to succeed?
IowaSuby 3:45PM (3/12/2009)
Mr. Oak, why would you think bankruptcy means everyone is fired? When a business goes Chapter 11, it protects them from their bad debt, it doesn't mean you shut down GM and send everyone home for good. Also, AIG would be broken up into pieces and other banks would employ the people that went with what they bought up. 75% of those employees would probably keep their jobs. The percentage might be less or more but regardless, it doesn't mean everyone is fired. Your math doesn't add up.
Mr.Oak 4:01PM (3/12/2009)
Iowa: I personally believe that GM's current business model is a big part why they are in trouble.
Chapter 11, works for a RESELLER, will not work out so well for a Big Ticket Item manufacturer. GM needs to be reorganized. The preferred way would be outside of bankruptcy.
Even if these were boom times, it would be rather stupid for any of the Big 2.5 to file for bankruptcy. In these times,it would be the kiss of death.
There is something much more sinister afoot here. Most of the folks on "the Street" that are crying for bankruptcy are looking to use Chap. 11 as a union busting tool. They couldn't give a damn whether or not GM ever builds another car. I work on Wall Street, I know these folks. Less than 10% of these folks buys domestic automobiles anyway.
Edmond Dantes 4:06PM (3/12/2009)
Damn it. Stop talking about nipples.
Mr.Oak 4:12PM (3/12/2009)
Iowa: Another point, GM filing for bankruptcy will have a ripple effect through its entire chain of suppliers. GM in Chapter 11 doesn't stop at GM's front doors.
Ford, GM, Toyota, Honda, Chrysler, Bombardier, Navistar, Mack, White, Kenworth etc. have overlapping parts suppliers.
We could wake up tomorrow looking a lot like "Great" Britain.
MajorGeek 4:31PM (3/12/2009)
Boobies
Coolio 4:51PM (3/12/2009)
Sea :
Are you kidding ?!?!?! The failure of a D3 automaker would take about a decade to get over. Are you saying that if they went belly-up we'de be over it by now ? Good God, man !
Coolio 4:53PM (3/12/2009)
Well said Mr. Oak !!!