- The Washington Times - Thursday, March 12, 2009

DETROIT (AP) - General Motors Corp. says its restructuring plan is starting to take hold, improving the automaker’s fortunes at least to the point that it won’t need a $2 billion government loan installment that it had requested for March.

Chief Financial Officer Ray Young said Thursday that GM formally told the Obama administration’s autos task force on Wednesday that it wouldn’t need the money this month. But in an interview with The Associated Press, Young would not say when the struggling automaker would need more government money or whether it will reduce the size of its loan request.

“It seems like our companywide cost reduction efforts are moving well, as well as we’ve been able to defer spending that we previously anticipated in January and February,” Young said. “I think that’s a positive development.”

Sen. McSally not sorry for insulting CNN reporter: 'I'm a fighter pilot. I called it like it is'
Football coach fired for praying gets handshake at White House
The Democrats' debate debacle

GM, which is living on $13.4 billion in government loans, has requested another $16.6 billion as it tries to weather the worst auto sales slump in 27 years.

Young said GM is continuing to calculate its cash balances and plans to update the task force when it may need more money.

“We’re working through the forecast right now,” he said. “We’re not going to slow down in terms of our companywide cost reduction initiatives. We continue to look toward deferring expenditures as much as we can in order to avoid having to draw more liquidity.”

Young’s statements appeared to help GM’s shares. They rose 24 cents, or 12.9 percent, to $2.10 in afternoon trading.

Young said GM’s cash burn rate, the amount of spending above revenue, has slowed since the company submitted a viability plan to the government on Feb. 17.

“The cash burn that we thought we were going to have in January and February is not as high. Clearly we still have a cash burn,” he said, attributing the burn rate to a lack of revenue from the company shutting down many of its factories for the month of January.

GM burned through $19.2 billion in cash last year on its way to a $30.9 billion loss.

Young would not say if GM will need another government loan draw in April. In its viability plan filed Feb. 17, GM asked for $2 billion in March and another $2.6 billion in April. It would not need any more money until 2011 when a $4.5 billion revolving line of credit comes due. The company also says it could need up to $7.5 billion more if the economy doesn’t improve, for a total of $30 billion by 2011. It plans to start repaying the loans with $2 billion in September.

GM is coming close to spending the $13.4 billion in government loans it received through February. The money, Young said, was used largely to pay parts suppliers, employees and dealers when GM had little revenue coming in due to January production slowdowns across the globe.

“We had very little receipts, but we still had a lot of payments related to prior production and prior sales,” he said. “We used that liquidity in order to address basically a lot of expenses that we had.”

Young also said in the interview that GM’s new contract with the Canadian Auto Workers union, ratified Wednesday by the membership, comes very close to closing the cost gap that GM has with foreign automakers that have U.S. factories.

He conceded it doesn’t close the entire gap, and would not say how much GM will save from the concessions or what its hourly labor costs would be. Young also said GM is in talks with the CAW and the Canadian government about forming a trust fund that would pay retiree health care costs inn Canada.

Young wouldn’t comment on Chrysler LLC Vice Chairman Tom LaSorda’s threat to close Canadian plants if Chrysler doesn’t get cost-competitive contracts and government aid, saying Chrysler’s costs could be different from GM’s.

GM, under the CAW contract, agreed to keep 20 percent of its North American manufacturing volume in Canada. The agreement includes a wage freeze to September 2012, the elimination of an annual bonus and a reduction in paid time off, among other concessions.

Young also said negotiations are progressing in the U.S. with the United Auto Workers over swapping stock for part of the cash payments that the company is required to make to a union-run trust that will take over retiree health care costs next year. GM already has a deal on other labor cost concessions, but details have not been released.

Both the trust concessions and labor cost cuts are required under term sheets that came with government loans granted to GM and Chrysler. The term sheets say both companies must do their best to reduce labor costs so they are equal to Japanese automakers with U.S. factories by the end of this year.

Ford Motor Co.’s U.S. hourly workers earlier this week approved cost cuts and funding half the trust with stock, and the UAW has said the GM deal would be patterned after Ford’s.

Ford officials said Wednesday that the concessions would reduce its total hourly labor cost to $55, still at least $6 higher than Japanese automakers with U.S. factories.

But Young said GM can still comply with the terms of its loans using the Ford deal as a framework.

“We’re working through that,” he said. “There are other things that we can work on with the UAW in terms of further closing the gap, and a lot of that’s related to improving productivity further.”

Young said Ford also indicated it would need productivity gains to close the cost gap.

“I think the term sheet says that we’re going to be competitive with the transplants. It doesn’t say identical.”

Ultimately, Young said GM still has to demonstrate to the autos task force that it can become viable.

Sign up for Daily Newsletters

Manage Newsletters

Copyright © 2020 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.


Click to Read More and View Comments

Click to Hide