GM sweats the small stuff as bailout talks drag

DETROIT - General Motors is saving every cent it can, from shutting down escalators at night to limiting workers' choice of pens, in case it needs to fight to survive beyond year's end and until a friendlier Washington takes over.

The company has already cut its U.S. work force by almost 80,000 people this decade, reducing it to 96,000, and it has idled five factories and laid off 11,000 domestic workers this year alone.

But the cost-cutting has accelerated as cash has dwindled and as Congress has fought over whether to send money to the automakers. Factory supervisors who are seldom at their desks have had their landline phones and voice mail yanked. Elevators and escalators are shut down at night at GM's headquarters towers in Detroit.

The slimmed-down choice of pens in office supply cabinets: one each of black, red and blue.

"It seems trivial, but when you have 100,000 employees or however many using supplies, they don't need to be that prolific. It adds up," said spokeswoman Renee Rashid-Merem.

The once-mighty icon of American industry and its smaller competitor Chrysler LLC have few options as they edge closer to bankruptcy.

Experts say their best shot is for President-elect Barack Obama to persuade the outgoing White House to free up emergency loans from the $700 billion federal bailout, or to have the Federal Reserve make a loan.

The $14 billion auto industry bailout bill stalled in the Senate on Thursday, with Republicans demanding concessions from the United Auto Workers union. It was not clear what givebacks the union was willing to discuss.

Failing that, GM and Chrysler must continue to cut even the smallest expenditures and hold off payments to parts suppliers as they hoard cash and try to stay alive until Obama takes office Jan. 20 and could take his own action.

And a carload of penny-pinching might not be enough.

GM has hinted it might not make it through the end of the year before running out of cash. But GM board member Kent Kresa said earlier this week that the company might make it into the first quarter, depending on auto sales.

"Certainly it has been stated that we need the money quite soon," Kresa told The Associated Press. "I can't specifically state before the end of the year, but certainly in the first quarter and early in the first quarter."

GM wants a total of $18 billion in government loans, including $4 billion before this year runs out. And Chrysler, which is looking for $7 billion in loans, may be even closer to the edge.

Its CEO, Robert Nardelli, said its cash would drop to $2.5 billion, its minimum to survive, at the end of the year. It has cut 32,000 workers since private equity firm Cerberus Capital Management LP took over control in August of last year, including 25 percent of its salaried work force last month.

The other of the Detroit Three, Ford, is not yet seeking government loans but wants a $9 billion line of credit that it might need to tap if the depressed U.S. auto market doesn't recover. It says it can last through 2009 because it borrowed billions two years ago, when credit was freely available.

The possibility remains that a deal can still be worked out in the Senate. Republican opponents, mainly from Southern states, probably don't want to bring the industry down, said David M. Hart, associate professor of public policy at George Mason University in Virginia.

"It's certainly not beyond the scope of possibility that they'll get this thing through," Hart said. "I think it's hard for Republicans to have this on them. There's a lot of pressure. They might work out a deal."

Hundreds of thousands of jobs hang in the balance. The Detroit Three employ 239,000 workers in the U.S. Counting other businesses that depend on the automakers, economists estimate that 2.5 million jobs would be lost if all three companies went out of business.

Susan Helper, a professor of economics at Case Western Reserve University in Cleveland who has studied the auto industry, said GM and Chrysler's suppliers are the key to keeping the automakers out of bankruptcy protection if they are forced to stretch and try to make it past Obama's inauguration.

Suppliers, also cash-strapped, may start demanding payment in advance before shipping parts. If enough suppliers get nervous and start demanding cash, the companies could run short.

"Then you have this game of musical chairs where everyone wants to make sure they're not the one left without a chair," she said. "That very process can bring the whole structure down. Right now the suppliers have been incredibly disciplined and not saying, 'Hey, pay us first,'" she said.

Already, a small number of GM suppliers have sought cash on delivery, but the company is working through the situation, CEO Rick Wagoner said last week.

"I would say there are a couple situations that we are managing, but on balance I'd say it's really held in there quite well," he told the AP.

When Chrysler tried to stretch its money until it could get a government-guaranteed loan in 1980, it ran short of cash two weeks before the loan came through, said Steve Miller, an assistant treasurer at the time who now is executive chairman of Troy-based Delphi Corp., GM's former parts wing.

"Any one supplier could have pulled the rug out from under us and prevented us from building cars," Miller said in an interview.

But suppliers, he said, knew their futures were dependent on Chrysler's financial health.

"We hung in there and the suppliers stayed with us," Miller recalled.

If, for whatever reason, the companies go into Chapter 11 protection, credit is so tight that they might not be able to get bankruptcy financing, Helper said. A bankruptcy judge, she said, could hold off creditors and possible liquidation until the companies arranged financing, most likely from the government.

"It seems pretty clear that the only potential provider of the (bankruptcy) financing is the government," she said. "You'd have some period of figuring out the terms under which that ... financing is going to be offered."

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