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Wednesday, 18 February 2009

GM to cut 47,000 jobs

DETROIT - GENERAL Motors Corp, presenting a dire outlook for the future, said on Tuesday it may need US$30 billion (S$45 billion) in total government financing to weather the economic downturn and would cut 47,000 jobs worldwide - 26,000 of which will come from outside the United States - and shutter five more US factories in a massive restructuring plan.

The automaker is already surviving on US$13.4 billion in federal loans and said in a plan submitted to the US Treasury Department that it would seek an additional US$16.6 billion if economic conditions worsen, but it could achieve profitability in two years and fully repay its loans by 2017.

The US automaker presented its turnaround plan to the Obama administration as it worked to win concessions from the United Auto Workers union and bondholders to dramatically resize the company.

The UAW said it reached a tentative deal with GM, Chrysler LLC and Ford Motor Co on contract changes but discussions were still under way about how the companies would fund union-run trust funds that will take over the companies' retiree health care obligations starting next year.

GM said it was making progress but had not yet achieved all the concessions from union workers, debt holders, dealers and suppliers that the Bush administration sough in the loan terms provided last December.

President Barack Obama's administration will review the plans from GM and Chrysler LLC but could pull the loans if they don't approve the turnaround plans by March 31. The review could be extended into April, but if the government demands the money back it would force the companies into bankruptcy.

GM predicted it could run out of money before the March deadline and said it is seeking the additional funding under a worst-case-scenario projection, as US sales have plummeted to a 26-year low and auto sales have fallen in other parts of the world.

In December, GM said it might need a total of US$18 billion in government financing but only got a commitment of US$13.4 billion, including US$4 billion that the automaker received on Tuesday.

GM wants to receive an additional US$2 billion in March and US$2.6 billion in April. The company has a US$4.5 billion revolving line of credit that must be refinanced in 2011 but now believes that private funding won't be available, so the automaker is asking the government to lend the money.

If market conditions deteriorate, GM says it may also need an additional US$7.5 billion revolving line of credit to stay afloat, for a total potential request of US$30 billion.

GM said it reviewed the potential costs of a bankruptcy filing, but said it was a poor option. If GM was forced into Chapter 11 reorganisation proceedings, the company said the only credit available would be from the government, and the cost could reach as much as US$100 billion.

GM's plan details extensive cuts. The automaker would reduce its U.S. manpower from 92,000 salaried and hourly workers at the end of 2008 to 72,000 employees by the end of 2012. Worldwide, it envisions slashing 47,000 workers, including 37,000 hourly workers and 10,000 salaried employees.

In its Dec 2 plan to the Bush administration, GM said it would cut the number of plants from 47 in 2008 to 38 by 2012. But the new approach goes further, cutting an additional five plants by 2012 to a total of 33 facilities.

GM's brands would be reduced from eight to four - Chevrolet, Buick, Cadillac and GMC - as the automaker said in December.

The company is considering a sale of the Hummer brand and a decision could be made by the end of March. The Saturn brand could be phased out by the end of 2011. The company is also considering its options for the Pontiac and Saab brands.

GM said all of its major US vehicle launches from 2009 to 2014 would be high-mileage cars and crossovers. -- AP, AFP

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