US car makers seek US$50b to help weather falling sales

By John Hughes  |   2008-11-8  |     NEWSPAPER EDITION

GENERAL Motors Corp, Ford Motor Co and Chrysler LLC, strapped for cash as sales plunge, are seeking US$50 billion in federal loans to help them weather the worst auto market in 25 years, a person familiar with the matter said.

The package would be US$25 billion for health-care spending and US$25 billion for general liquidity that could be delivered in different ways, including short-term borrowing from the Federal Reserve, said the person, who asked not to be identified because the plan isn't public. In return, the companies would be willing to take steps such as granting stock warrants, the person said.

The auto makers should receive "additional help" from President George W. Bush's administration, Senate Majority Leader Harry Reid said after meeting with their chief executive officers in Washington. Congress approved a US$25-billion loan program in September to help build fuel-efficient vehicles.

The three companies, their unions and legislative allies are hunting for aid after a combined US$28.6 billion in combined first-half losses. New vehicles sold at a seasonally adjusted annual rate of 10.6 million in October, the lowest since 1983. The Bush administration should use its existing authority to provide the help, Reid said on Thursday in a statement, without being specific as to the amount. Congress will also continue exploring ways to aid the auto makers, the Nevada Democrat said.

Spokesmen for the auto makers have declined to say how much assistance they're seeking. The United Auto Workers said on Wednesday it backed US$25 billion in loans for auto makers' health-care costs and other aid for "immediate liquidity."

Analysts estimate that GM and Ford will report operating losses when they release third-quarter results today. The financial demands on the auto makers include contributing to UAW- run trusts being created to take over responsibility for retirees' medical bills, Bloomberg News said.

GM Chief Executive Officer Rick Wagoner, Ford's Alan Mulally, Chrysler's Robert Nardelli and UAW President Ronald Gettelfinger also met on Thursday with House Speaker Nancy Pelosi, a California Democrat. The auto chiefs didn't take questions from reporters.

GM will work with Reid and Pelosi "to ensure immediate and necessary funding to keep the auto industry viable," the Detroit-based auto maker said in a statement.

Nardelli said in a statement Chrysler was "encouraged" by the law makers' understanding of the importance of the auto industry. Mulally said "we applaud their efforts."