No bright side in GM, Chrysler bailout

General Motors Corp. and Chrysler LLC, two venerable titans of American industry, will burn through $17.4 billion in government loans in three months and want billions more to stay alive.

The ink is still drying on their new requests for an additional $21.6 billion, but for President Barack Obama’s month-old administration, there are no easy answers.

Give them more money? GM and Chrysler could return seeking more. Let them slip into bankruptcy? Hundreds of thousands of jobs could be lost. Try a government-led bankruptcy? In GM’s case, that might cost up to $100 billion.

“The big unknowns are how much worse and long this recession will continue, how the credit market will work going forward and when will people feel more confident in being able to afford new cars,” said John Revitte, an MSU labor and industrial relations professor.

“A lot of these plans are for what they are going to have in 2011, 2012. There is
probably going to be a point where the population will want the government to stop suppling companies if they don’t see improvement.”

At stake are jobs at assembly plants, car dealers, parts suppliers and the small businesses that serve them, all of which could be at risk in a fatigued economy with nearly 12 million people who are unemployed.

“This is an entire way of life here,” said Rep. Thaddeus McCotter, R-Livonia. “An entire state is hanging in the balance.”

Even if Obama meets GM and Chrysler’s requests for an additional $14 billion in loans and the companies execute the turnaround plans they released Tuesday, it would come with a painful price: An estimated 50,000 workers worldwide would lose their jobs and five more U.S. plants will be closed.

“The best case scenario is still a substantial loss of jobs,” Revitte said. “Worst case scenario would be absolutely devastating to Michigan and the country. Hopefully, the stimulus will kick in and help get some more sales going in the industry.”

GM and Chrysler, which initially received $13.4 billion and $4 billion, respectively, are now asking the government for a total of $39 billion, saying they need more loans due to a U.S. auto market where sales have fallen to depths not seen in more than a quarter century.

Without additional aid, GM said it will run out of money in March.

Both companies painted bleak pictures of bankruptcy, arguing it would cost the government more to finance than bailing them out.

GM said Chapter 11 bankruptcy would cost at least $45 billion, and Chrysler CEO Bob Nardelli said his company would need up to $25 billion in financing.

GM Chief Operating Officer Fritz Henderson said the Detroit company’s restructuring plan is based on conservative projections and is “one that would not require us to do this again.”

GM, whose entire request grew to $30 billion, expects to spend $14 billion more than it takes in this year. The company predicts positive cash flow of $6.6 billion in 2012. With the restructuring, which calls for 47,000 job cuts, GM says it could turn a profit by 2010 and fully repay its loans by 2017.

Chrysler, whose majority owner is private-equity firm Cerberus Capital Management LP, expanded its loan request to $9 billion.

The company said it would cut 3,000 jobs and shed three models.

The Associated Press and staff writer Pat Evans contributed to this story.