Automakers Want $34 Billion, What Do We Get?
This is for all of you who have e-mailed me over the last month saying, "Give me a break, the Big 3 know they'll need more than $25 Billion."
You folks were right, by more than $9 Billion. It turns out Detroit is now telling Washington it may need up to $34 Billion. And for that amount, what will the auto makers promise law makers?
GM is the most aggressive in terms of restructuring its business over the next three years. For that, President Fritz Henderson and CEO Rick Wagoner deserve some credit. They have laid out a fairly ambitious plan that calls for cutting up to 31,000 jobs (almost a third of GM's U.S. work force) by 2012, closing 11 of its 48 plants in North America, dropping 2,000 dealers, and selling the Saturn and Saab brands. You may argue about whether or not GM's blue print will steer the company back to profitability, but you can't accuse the company of holding back.
Ford's is not ambitious, mainly because Ford is a smaller company already in the midst of a substantial restructuring. The company plans to sell Volvo, roll out a line of electric vehicles starting in 2010, and continue to push its current plan of bringing smaller, more fuel efficient European models over to the U.S. Ford is also the only member of the Big 3 that has set a target date for getting back in the black: 2011.
Chrysler's plan may be the most troubling, largely because it shows how much money the company needs right away. Chrysler wants $7 Billion by the end of the year. Chrysler's plan also talks about the "synergies" that would be derived from Chrysler being consolidated with another auto maker. Make no mistake, Cerberus wants to unload this company as quickly as possible.
As I read through all of these plans, a few things struck me.
First, if the Big 3 follow through on these plans, America's auto industry, as we've known it for decades, will be radically different.
Second, it is clear the UAW will have to step up and work with the auto makers to cut costs. Whether that includes formally cracking open the contracts to remove provision like the "jobs bank" or simply working within the existing contract, things have to change, and change quickly.
Third, will Congress be convinced that this is all the money the Big 3 need to survive? I'm not sure. The auto makers will get at least $25 Billion in the next week, but beyond that will be a much tougher sell.
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