General Motors Corp. and Chrysler said Tuesday that they needed nearly $22 billion more in government loans to avoid financial ruin, further darkening a day of global financial turmoil.
The struggling Detroit automakers said in business plans submitted to the Treasury Department that they needed a total of $39 billion in taxpayer-funded loans by 2012 -- and perhaps billions more in following years -- to help them survive plunging auto sales amid the global recession.
The requests now must be reviewed by the Obama administration, which faces the prospect that the auto industry could continue to seek bailout money for years to come.
The plans, aimed at showing how the automakers would remain viable with government loans, came as President Obama signed into law the $787-billion stimulus package aimed at halting the U.S. economy’s downward spiral and save 3.5 million jobs.
But fresh doubts about the health of the banking industry and the ability of the stimulus to turn things around helped send markets reeling worldwide Tuesday.
The Dow Jones industrial average of blue-chip stocks fell nearly 300 points, or 3.8%, leaving it less than a point above the five-year low it set in November. In Asia, Europe and Latin America, stock indexes tumbled as much as 5% over similar concerns.
The automakers’ restructuring plans, submitted after U.S. markets closed, were required under terms of the initial agreement approved by former President George W. Bush to issue $17.4 billion in loans to the automakers.
The companies said they would institute cost reductions and structural overhauls -- cutting thousands more jobs, eliminating brands and selling assets -- but they hinged their success on greater access to federal financial support.
The additional loans represent a small percentage of the remaining financial rescue fund approved last fall, said Rep. Sander M. Levin (D-Mich.), who noted that some banks also have needed more money than initially anticipated because of the worsening recession.
“They’re serious and sobering,” Levin said of the companies’ plans. “But do we want to penalize realism? I don’t think so.”
A panel of top Obama economic advisors, including Treasury Secretary Timothy F. Geithner and National Economic Council Chairman Lawrence H. Summers, will start reviewing the plans this week and determine by March 31 whether they ensure long-term viability.
The government is not obligated to lend the carmakers any more money and could require immediate repayment of the existing loans, a demand that would probably trigger bankruptcy filings for both companies.
“It is clear that . . . more will be required from everyone involved -- creditors, suppliers, dealers, labor and auto executives themselves -- to ensure the viability of these companies going forward,” White House Press Secretary Robert Gibbs said Tuesday evening.
Obama administration officials did not say how much more money the government would be willing to lend to boost the U.S. auto industry, which has suffered huge losses and declining cash positions as sales have plummeted.
Through the first nine months of last year, GM lost $21 billion and in November said that without government aid, it would no longer be able to pay suppliers.
To stay afloat, GM said, it would cut an additional 47,000 jobs this year, reduce half of its vehicle brands in the U.S. and cut the number of models it sells by a quarter. Chrysler said it would eliminate 3,000 employees, cut production by 100,000 units and kill three models.
To accomplish all that, GM said it would need up to $30 billion in loans by 2011, including the $13.4 billion it already had received. Chrysler said it would need a total of $9 billion, including $4 billion it received in early January.
Ford Motor Co. has not requested federal aid, though it has left open that possibility should market conditions decline further.
Loans would most likely continue to come from the $700-billion financial rescue fund passed by Congress last fall.
Industry analysts were skeptical that the plans, even if fully funded by the government, would be sufficient to ensure the survival of the two automakers.
“The most important issue is not what the automakers are going to do to cut costs, but rather what the government is going to do to stimulate car sales,” said Jeremy Anwyl, chief executive of auto research Web site Edmunds.com.
“No automaker is viable under the current market conditions.”
Both carmakers said they faced insolvency without further federal aid and that the alternative -- bankruptcy -- could cost taxpayers considerably more.
“We’re talking about a cost of $60 to $70 per tax filer for a $9-billion bailout,” said Chrysler CEO Robert Nardelli. But a complete closure and sale of the company in pieces “would probably cost the people on the order of $1,200 apiece.”
In response to a request from the Treasury Department, Chrysler and GM prepared scenarios for bankruptcy as part of their filings. Chrysler said a liquidation of the company would require as much as $25 billion in financing to carry out, while GM said that a Chapter 11 restructuring could cost $100 billion or more.
The new plans build upon those submitted by the automakers in early December. The government also asked GM to develop plans to reduce its $27 billion in debt by two-thirds, cut labor costs to be on par with Asian automakers and begin repaying federal loans in 2012.
To do all that, GM said it would close 14 U.S. factories by 2012 and eliminate 47,000 jobs this year, with 26,000 of them coming from the U.S. It also said it was seeking to reduce its network of dealers to 4,100 from more than 6,200 and to sell or discontinue its Saab, Hummer and Saturn brands.
If a buyer for Saab does not emerge, GM CEO Rick Wagoner said, the division “would have to file for reorganization.” A final decision on Hummer, which the company has been trying to sell since June, would be reached by March 31. Saturn would continue to operate through 2011, when it would be shut down unless a buyer is found.
Ken Croft, general manager of Saturn of Cerritos, said company executives notified Saturn franchise holders of the plan Tuesday and suggested that dealers or another outside group could buy the distribution network.
“You’ve got a lot of people’s jobs and incomes depending on what is going to happen here,” Croft said.
All three automakers said Tuesday that they had reached a tentative understanding to modify their contracts with the United Auto Workers union. Because the new agreements have not been ratified, however, terms were not revealed.
Tom LaSorda, Chrysler’s vice chairman, said the new terms dealt in part with reducing severance payments and changing work rules.
“The changes will help these companies face the extraordinarily difficult economic climate in which they operate,” UAW President Ron Gettelfinger said.
Neither GM nor Chrysler has come to agreement with the UAW over payments due to a fund established to cover retiree healthcare benefits. GM has tried to get the union to accept equity in lieu of some cash payments.
In addition, GM said it had not completed negotiations with bondholders to reduce outstanding debt. It offered few specifics about the process, which has drawn concerns from investors who balk at taking large losses on the deal. A bondholders group said late Tuesday that it would need details of the new union arrangement before negotiating.
In December, GM said it would require $12 billion in federal loans and an additional $6 billion line of credit. On Tuesday, it said that it would need as much as $30 billion altogether through 2012.
It also said that additional funds, above the amount requested, could be required in 2013 and 2014, though it expected to reach profitability by 2012 if the company’s economic forecasts were accurate. GM said it also was seeking money from Canada, Germany and Sweden.
Chrysler’s plans, as well as its aid request, are significantly smaller in scope than those of its bigger rival.
In December, Chrysler said it would need $7 billion to continue operations, and on Tuesday increased that total to $9 billion.
It has plans to cut production by 100,000 units and to cease production of the PT Cruiser, Dodge Durango and Chrysler Aspen models. It would cut 3,000 more jobs this year and reduce shifts at some plants.
Last month, Chrysler said it had worked out a preliminary deal with Italian automaker Fiat to share technologies and distribution infrastructure as a way to develop small automobiles without huge expenditures. In exchange, it would give Fiat a 35% stake in the company.
On Tuesday, Chrysler executives said the deal was contingent on the U.S. automaker’s receiving the additional federal funding, though the company would still be solvent without it.
“We believe we are viable on our own,” Nardelli said.
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Highlights of the viability plans General Motors Corp. and Chrysler submitted Tuesday to the Treasury Department:
* Seeks up to $16.6 billion in loans on top of $13.4 billion already granted, for a total of $30 billion. Previously, GM said it needed only $18.4 billion.
* Plans to begin repaying loans in 2012, paying in full by 2017.
* Plans to eliminate 47,000 jobs globally this year, about 19% of its workforce, including cuts already announced.
* Plans to close five U.S. factories, bringing the total closed to 14, with 33 remaining by 2012.
* Plans to reduce vehicle models to 36 from 48 by 2012. Its plans to roll out the Chevrolet Volt electric car remain on track for 2010.
* Seeks a sale or spin-off of the Saturn division. Will wind down production of Saturn models by 2011 if no buyer emerges by March 31.
* Plans to reduce dealerships to 4,100 by 2014 from 6,246 at the end of December.
* Seeks aid from other countries, including Sweden, particularly for Saab. Says Saab might have to file for bankruptcy protection if it cannot secure separate aid.
* Seeks $5 billion in government loans on top of $4 billion already received. Previously, it said it would need just $3 billion more.
* Plans to cut three models in 2009: the Chrysler Aspen and PT Cruiser and the Dodge Durango.
* Plans to fire 3,000 employees, cut production by 100,000 cars, reduce a manufacturing shift, cut fixed costs by $700 million and sell $300 million in “non-earning assets” in 2009.
* Says it is viable as a stand-alone company but still plans to tie up with Italian automaker Fiat.