An hour later than promised, General Motors submitted a restructuring plan to the Treasury calling for an additional $17 billion in government funds, on top of the $13.4 billion promised by the Bush Administration less than 2 months ago. Today’s request, if granted, would be $12.4 billion more than the company asked for in its last turnaround plan, sent to Congress in early December.
In its 177-page summary, G.M. promises a return to profitability in 2 years via a “comprehensive” transformation of its business.
To achieve that goal, the plan calls for “considerable sacrifice from all stakeholders,” including bondholders, employees and labor unions, and dealers. The company was forced to admit, however, that is has been unable to strike deals with the United Autoworkers or the holders of its long-term debt.
And cutting ties with dealers, a key part of restructuring sales operations, could take years and cost billions of dollars, due to restrictive franchise laws at the state level.
Even if it manages to achieve all the concessions in its plan, G.M. does not rule out requests for additional taxpayer dollars, which it may require depending on market conditions and the pace at which it is able to cut costs and reorganize.
The government’s initial “loans” to G.M. and Chrysler, totaling $17 billion, are unlikely to be paid back. Additional loans made outside of bankruptcy could suffer the same fate.
(Image of Chevrolet Corvair Lakewood CC licensed by Flickr user daveseven.)
