Bailout Me Out!

Posted by Kris | Friday, November 07, 2008 | | 0 comments »

Detroit pushes Capitol Hill for bailout

The Big Three meet with Pelosi and Reid to discuss industry's dim outlook and a possible bailout as GM and Ford face quarterly losses.

NEW YORK ( -- The heads of the three leading U.S. automakers met with the congressional leaders Thursday to discuss a possible bailout - one day before General Motors and Ford Motor are expected to report sizable quarterly losses and reveal painful cost-cutting measures.

Among the topics discussed were a $25 billion loan to fund union-controlled trust funds that would be set up in the coming year to cover the health care costs of retirees and their family members. Shifting about $100 billion of those costs from the automakers' balance sheet to the trust funds was a key concession the companies won from the UAW in the 2007 labor deals.

The discussions also touched upon allowing the automakers to tap into the $700 billion bailout of Wall Street firms and the nation's banks that was passed by Congress last month. Treasury has so far rejected auto-industry inquiries about accessing that pool of money.

The automakers also renewed their pre-election request to double the $25 billion low-interest loan program approved by Congress, as part of energy legislation, to help automakers convert to making more fuel-efficient vehicles in an effort to meet the demands of car buyers and new federal rules.

Sources also said the automakers are pushing back product development plans in an attempt to save cash. The move is a desperate one, as it hurts their plans to roll out the more fuel-efficient models they need to reignite sales. But they say they have no choice in the current environment.

"Everyone's having to do it," said another executive at a U.S. automaker who spoke on the condition his name not be used. "[Sales have] fallen off a cliff. These are far from normal slow times. We need to do what we're doing in the short-term to address that."

Both GM and Ford Motor are likely to discuss product development plans Friday when they report their financial results, according to sources.

Analysts surveyed by earnings tracker Thomson Reuters forecast that GM lost $3.51 a share in the quarter, or about $1.9 billion. Ford is expected to report a loss of 93 cents a share, or $2.2 billion.

These losses exclude special items. And with the companies looking at possible further cuts in production and payroll, there could be other charges that send losses even higher.

The situation is clearly dire for Detroit's Big Three - GM, Ford, and privately held Chrysler. Their Asian rivals have been struggling as well.

Toyota slashed its annual earnings forecast Thursday, saying profits will fall to less than a third of what they were the previous fiscal year. The Japanese auto giant will also post its first annual decline in U.S. sales since it became a major player here. The United States is now Toyota's largest market.

Automakers reported the worst month of auto sales in 25 years in October and sales are expected to remain weak into next year due to tight credit for consumers and dealers, rising job losses nationwide and battered consumer confidence.