|
|
Courtesy Photo/Image
Big 3 CEOs, from left: GM's Rick Wagoner, Ford's Alan Mulally and Chrysler's Robert Nardelli.
|
|
|
Courtesy Photo/Image
|
|
|
Courtesy Photo/Image
United Auto Workers president Ron Gettelfinger.
|
U.S. auto sales -- across all manufacturers, foreign and domestic -- have declined by more than 30 percent and are at their lowest levels in half a century. The rapid decline is without parallel, General Motors executives told Congress Thursday and Friday, when the big three Detroit automakers reappeared to ask Congress for $34 billion in emergency loans. That total request is $9 million more than the companies wanted two weeks ago, when they first appeared before Congress. At that time, leaders of the House and Senate sent the automakers home on their corporate jets and told them to return with comprehensive plans to get financially sound. Even though the Big 3's latest plans are better, Congress is still in a frugal mood. Some want to wait until the new Congress convenes in January. Some don't want any more bailouts. As of Saturday night, emergency loans of $15 billion seem to be in the works, but that’s probably all for this year, according to a CBS News report. A Congressional vote is expected next week.
To read the Big 3’s plans, see http://www.c-span.org/
Union concessions The autoworkers union agreed to phase out health care insurance for retirees. The United Auto Workers has agreed to cuts in health care and retirement costs of $13 an hour per employee, which will make the Big 3’s average employee cost $58 hour, compared to $49 an hour for competing auto makers such as Toyota and Nissan. Before the UAW concessions, the Big 3’s average employee cost was nearly $72 an hour. How bad it is The U.S., and much of the world’s economy, is on the brink of a severe recession if not a depression, following the collapse of trillions of dollars worth of bad home loans, fraudulent supporting securities, and overstretched credit users. General Motors spelled out the dire situation in its report to Congress: “General Motors is now coping with the worst economic downturn, and worst credit market conditions, since the Great Depression,” the report said. “Significant failures have occurred in America‘s financial services sector — including two of America‘s five largest investment banks, the nation‘s largest insurance company, both Freddie Mac and Fannie Mae, and two of the 10 largest banks — with financial institutions receiving total Government bailouts valued today at well over $2 trillion.” Consumers have had to contend with illiquid credit markets,” GM noted, “rising unemployment, declining incomes and home values, and volatile fuel prices.” The big automakers are on the verge of bankruptcy, especially GM and Chrysler. GM and Chrysler executives promise to cut their salaries to $1 a year until the companies are solvent again. But, even if Congress acts, employees are being terminated, some factories will be closed and employee and executive benefits will be substantially reduced. GM announced it would cut shifts at factories in Ohio, Michigan and Ontario in February. Where will money come from? President George W. Bush wants Congress to give the automakers money from a $25 billion fund, appropriated in September to help make cars more energy efficient. On the other hand, Democrats in Congress generally want any bailout to come from the Treasury Department's $700 billion financial bailout fund, known as TARP (Troubled Asset Relief Program). Several representatives noted that the automakers are being asked to show more evidence that they are "bailout worthy" than the banks that are getting TARP money. Concessions All three automakers promised to happily cooperate with the government’s fuel economy standards, which would make cars travel farther on a gallon of gas and also greatly expand the manufacture of electric cars in the near future.
Plan summaries General Motors -- The Chairman and CEO will reduce his salary to $1 for 2009 and will not receive an annual bonus for 2008 and 2009. -- Members of the Board of Directors will reduce their annual retainer to $1 for 2009. -- The four most senior officers (Executive Vice Presidents and above) will reduce total cash compensation by approximately 50% in 2009, with no bonus for 2008 and 2009 and a 30% salary reduction for the President/Chief Operating Officer, and 20% salary reductions for the other three. -- Immediately cease all corporate aircraft operations. -- GMAC, the lending company, will try to become a Bank Holding Company and participate in Government-sponsored liquidity and capital bailout programs, such as TARP. -- Agreed with unions to shift the liability of paying for health care for hourly retirees from GM to an independent trust (VEBA), to occur in 2010 and 2012. -- Employees hired on or after Jan. 1, 1993 will receive no healthcare benefit in retirement, and for those older retirees who will still be covered, GM will cap health care spending at 2006 levels. -- In addition, GM will no longer provide supplemental healthcare coverage to salaried retirees at age 65, effective Jan. 1. -- GM also suspended matching pension contributions for salaried participants, effective Nov. 2008.
Ford SALARIED PERSONNEL ACTIONS • Salaried Personnel – Already reduced numbers by 36% in three years – with a 10% reduction effective February 2009. -- Reduced contract personnel by 50%. • Compensation & Benefit Changes -- Eliminated 2009 merit increases and bonuses -- Suspended 401k match, tuition assistance and dependent scholarships. -- Capped retiree life insurance at $25,000. -- Increased employee share of the cost of benefit plans.
Chrysler -- Suspend matching 401 K contributions. -- Terminating lease car program. -- Ask more productivity of employees. -- Eliminate life insurance for retirees. -- Suspend tuition reimbursement programs for employees and the company will contribute less to employee health care insurance. -- CEO annual salary will be $1, with no health care, insurance benefits, no stock options or performance bonuses for top executives.
| 
Quick Links
