Wagoner: Conservative Outlook Costs More
General Motors CEO Richard Wagoner, Jr., says taking a conservative view of the future sent him back to the government to ask for more money.
"Basically, it's the lowest forecast that anyone out there has," he said. "We looked at all the consensus forecasts, we looked at all the people you normally look at, J. D. Power and others, so our numbers are the lowest that any forecasting bureau is using; sure, it could be worse, but, I think, to be honest, we took a very conservative route, and built the plan around it."
In a dramatic acknowledgment that conditions in the auto industry have grown significantly worse in just two months, GM said it would cut 47,000 jobs globally by the end of the year—19 percent of its work force. It also said it would close five more U.S. factories, although it did not identify them.
"The Treasury agreed to advance us $13.4 billion to cover the first-quarter needs, and then asked us to re-look at the whole thing, so, we're doing exactly what we said," Wagoner explained in a CNBC interview. "We said in December we would need $18 billion to cover a downside scenario, which we're in."
The grim report came as the United Auto Workers union said it had reached a tentative agreement with GM , Chrysler and Ford Motor on contract changes.
Concessions with the union and debt-holders were a condition of the government bailout.
The GM CEO said the labor negotiations have helped narrow the cost gap between unionized American carmakers and foreign competitors who operate non-union plants in the United States.
"Of the labor cost gap that we had, it takes a huge bite out of it," he said. "It doesn't completely close the gap, so we have some more work to do, and we've got ideas on how we might do that."
He said he has not yet met with Ron Bloom, brought in by the Obama administration to work with auto industry executives on corporate restructurings.
"All the feedback is, his reputation is excellent, particularly in these situations where restructurings are required, so we look forward to working with him," he said.
Wagoner told CNBC bankruptcy would not be a significantly better alternative. (See the accompanying video for more.)
"Bankruptcy entails the risk of, 'once you go in, do you get out?' Secondly, the loss of revenue that you will incur when you go into bankruptcy; and third, the fact that within bankruptcy, a number of liabilities on our balance sheet can't be extinguished," he said. "We have huge liabilities for warranty accruals for customers; we have payments that we owe to our dealers; we have huge payments that we owe to our suppliers."
GM's report said the company is exploring ways to get rid of its Hummer, Saab, and Saturn brands.
"It's clear that we need to make a call here over the next 45 days or so," Wagoner told CNBC.
-- The Associated Press contributed to this article.