UPDATE: GM Says It Doesn't Need $2 Billion In Aid To Get Through Mar
March 12 2009 - 2:34PM
Dow Jones News
General Motors Corp. (GM), which had said it needed $2 billion
to avoid running out of cash by the end of March, said Thursday it
can survive for now without the loan.
GM still needs the money, just not as quickly as anticipated, a
company spokeswoman said Thursday. The auto maker is working to get
up to $16.6 billion in additional loans, which includes a cash
infusion of $2.6 billion in April.
Cost-cutting moves and spending deferrals in January and
February improved GM's immediate cash position, allowing the
company to put off the aid request, the auto maker said in a
statement.
"This development reflects the acceleration of GM's company-wide
cost reduction efforts as well as pro-active deferrals of spending
previously anticipated in January and February," GM Chief Financial
Officer Ray Young said in a statement.
The Treasury Department confirmed that GM had notified the
administration's auto task force on the loan issue, though
officials declined to say when. One official said GM's delay on the
need for more federal assistance "doesn't change our timeline or
approach" on how to rescue GM and Chrysler.
Shares of GM were up 12.4% to $2.09 in recent trading. Shares of
Ford Motor Co. (F), which hasn't requested federal loans, were up
6.6% to $2.09.
Chrysler LLC, subsiding on a $4 billion federal loan, said it
needs another $5 billion and could run out of money if it doesn't
get additional loans by the end of March. The auto maker had no
comment on whether it too would delay any financial aid request. In
a statement, Chrysler said its restructuring plans remain "on
target" toward being completed by March 31.
GM, struggling to avoid bankruptcy amid a global sales slump,
has been surviving on a $13.4 billion federal loan since December.
An automotive task force appointed by President Barack Obama faces
a March 31 deadline to decide whether to give GM additional
loans.
GM's ability to last without an immediate infusion relieves some
pressure on the task force to make a decision. Key elements of GM's
restructuring plan - namely concessions from the United Auto
Workers and bondholders - remain unresolved as GM negotiates with
both groups.
The Thursday announcement comes following approval of a new
labor contract by the Canadian Auto Workers, announced late
Wednesday.
The Canadian labor deal freezes wages for active workers and
pension payments for retirees. Workers will get less time off and
forgo cost-of-living pay increases. In addition, retirees for the
first time will make co-payments for health care.
The new deal is part of GM's efforts to restructure operations
in all regions as it seeks billions in aid from other
governments.
The Canadian government said any loan to GM is contingent on the
auto maker's ability to get concessions from workers.
The deal will "quickly reduce costs in Canada by significantly
closing the competitive gap with U.S. transplant automakers on
active employee labor costs," GM's Young said in a statement.
He said GM is in talks with the CAW and Canadian government over
creating a company-funded health care trust that would be run by
the union to cover retiree medical costs, similar to what the
company negotiated with the United Auto Workers in 2007.
-By Sharon Terlep, 248-204-5532; sharon.terlep@dowjones.com.
(John Stoll and Neil King contributed to this story.)