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The Detroit automakers have been lumped together for decades as the Big Three, and for good reason; their goals have usually been aligned.
But this week, as the automakers take a second run at Congress, hoping to persuade lawmakers to give them $25 billion in federal aid, their agendas are diverging as they contemplate futures as drastically different car companies.
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CNBC.com Big 3 Bailout |
Those differences will become clear as they deliver more detailed plans for how they would use that money not just to survive, but also to turn themselves around to be competitive in the long term.
That should make for a sharp contrast to the hearings two weeks ago, when the executives presented a united front, saying in lockstep that it was the credit crisis and weak economy, not their strategies, that had put them in dire straits.
General Motors [GM
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], the biggest of the troubled car companies, is expected to propose a significant shrinking of its North American operations, including shutting more factories and streamlining its sprawling brand lineup, according to people with knowledge of G.M.’s deliberations.
One move under discussion, for example, would have G.M. buy out dealers that exclusively sell Saturns and market the cars through its Buick-Pontiac-GMC dealers instead, according to these people.
G.M. is also likely to propose moves that would require cooperation from the United Automobile Workers union, including delaying the company’s $7 billion payment to the union’s retiree health care fund.
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The Ford Motor Company [F
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], however, is not likely to propose more cuts, as it is further along than Chrysler and G.M. in shifting to a more fuel-efficient lineup of vehicles. It also has more cash to weather the downturn. Instead, people with knowledge of Ford’s strategy say the automaker is considering more symbolic moves, including reducing the pay of its chief executive, Alan R. Mulally, who earned more than $21 million last year.
The third automaker, Chrysler, which is privately owned, has acknowledged it is running out of cash and may tell Congress that it needs a merger or alliance with another company to survive long term.
The U.A.W., whose members build cars for all three companies, is not involved in developing any of the plans, even though its political influence is a crucial factor in whether a bailout gets approved.
On Tuesday, G.M., Ford and Chrysler are scheduled to deliver separate aid requests to lawmakers, who will hold hearings on the plans later in the week.
The critical components in each of the plans will be how the companies expect to spend their share of the money, and what changes each automaker will make to shore up their faltering operations.
“We need to understand what this money is going to be used for and why it makes sense for the American people to invest in these companies,” said Senator Claire McCaskill, Democrat of Missouri, in an appearance on “Fox News Sunday.”
At the forefront is G.M., whose board began a two-day meeting on Sunday to complete its aid request.
G.M., which has lost more than $20 billion so far this year, is asking for up to $12 billion to keep its operations running through 2009.
The company has suffered a steep decline in revenue this year, in what has been the worst market for vehicle sales in the United States since the early 1990s.
G.M. has previously announced huge cuts, including a 30 percent reduction in white-collar costs and the elimination of health care for salaried retirees.
(Shelly Lombard, Gimme Credit Publications and Paul Ingrassia, Conde Nast Portfolio/Pulitzer Prize winner, discuss GM's plan in the video).
But the company, under the direction of its embattled chairman, Rick Wagoner, is expected to reorganize further to win over skeptical lawmakers.
People with knowledge of G.M.’s plans say the automaker may eliminate one or more of its eight domestic brands and downsize its manufacturing capacity to match its shrinking market share.
“It’s clear that G.M. has to shrink, but the bigger question is, How does the company change its structure and do business if it gets smaller?” said John Casesa, a principal in the automotive consulting firm the Casesa Shapiro Group.
The union’s president, Ron Gettelfinger, said Sunday that his members were prepared to reopen bargaining on terms of their contract. But he said the automakers needed to share in any sacrifice by limiting executive pay and other compensation.
“They need to establish that executive compensation is something that they’re willing to curtail, as well as bonuses and golden parachutes on exiting the business,” he said on the CNN program “Late Edition.”
During the first round of Congressional hearings on the bailout last month, Mr. Wagoner and his counterpart at Ford, Mr. Mulally, declined to say whether they would cut their salaries. Chrysler’s chairman, Robert L. Nardelli, said he would consider taking a nominal $1-a-year salary.
All three executives were also roundly criticized for flying to Washington on corporate jets. The companies have said that the chief executives will find other means of traveling to this week’s hearings.
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