- The Washington Times - Wednesday, February 18, 2009

UPDATED:

Chrysler LLC, the privately held auto maker that received a $4 billion government bailout in December, requested another $5 billion in government loans Tuesday.

When Chrysler sought a federal bailout last year, it requested $7 billion. Tuesday’s $5 billion request brings the total sought to $9 billion.

Chrysler attributed the increased request to “unprecedented economic decline and a drop in current and forecasted” total vehicle selling rates in the United States.

As part of its restructuring plan, Chrysler pledged to cut 3,000 jobs, reduce production capacity by 100,000 vehicles and lower fixed costs by $700 million this year.

In its report filed with the Treasury Department, Chrysler claimed it had reached important agreements with its labor unions, dealers and suppliers. Those agreements, Chrysler said, would reduce its labor costs so that it would be competitive with the labor costs of foreign auto makers operating plants in the United States.

The United Auto Workers announced Tuesday it had reached tentative agreements with Chrysler, General Motors and Ford.

The changes will help these companies face the extraordinarily difficult economic climate in which they operate. Discussions are continuing regarding the Voluntary Employee Beneficiary Associations (VEBAs) at all three companies,” the UAW said, referring to the union-administered trust fund created to pay for retirees’ health care.

The UAW is withholding the terms of the tentative understandings pending completion of the VEBA discussions and ratification of the agreements.”

Chrysler’s sales, which fell 30 percent last year, plunged 55 percent in January compared to a year ago.

Earlier this year, Chrysler agreed to give Italian auto maker Fiat SpA 35 percent of its equity. In exchange, Fiat would provide small-car technology and access to worldwide markets. More than GM and Ford, Chrysler is dependent on pick-up trucks, vans and sport-utility vehicles. The agreement with Fiat depends on the government increasing its loans to Chrysler.

GM, which received $9.4 billion in government loans last year and another $4 billion this year, will be filing its own restructuring plan Tuesday seeking still more taxpayer-funded aid.

Treasury Secretary Timothy Geithner and Whit House economic adviser Lawrence Summers will lead a task force to review the requests from Chrysler and GM.

The restructuring reports due today are preliminary. The firms must submit final plans by March 31. Then, the government will decide whether to increase the size of the bailout. An alternative would be to force one or both firms into bankruptcy.

GM’s share price fell 13 percent Tuesday, closing at $2.18, down more than 90 percent from its 52-week high.

When the Bush administration approved $9.4 billion in loans to GM in December, it pressured bondholders to reduce GM’s debt as much as two thirds in exchange for equity interests. But bondholders have been holding out, insisting on concessions by workers.

U.S. auto sales have dropped nearly 40 percent during the past year, as the U.S. economy shed more than 3.5 million jobs since entering recession in December 2007.

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