Tuesday, December 2, 2008

Now Running: The Detroit BridgeLoan 500

The top officers from Detroit are back in Washington this week to enter round two of the BridgeLoan Bailout, their own race for survival.

Top brass from GM, Ford and Chrysler will provide lawmakers with detailed viability plans to justify the $25 billion bridge loans they are requesting.

They are expected to show up looking more contrite, more prepared, and armed to the teeth with data and public relations pieces.

They will bring assistants, advisers, associates, and a reluctant ally, the UAW.

The UAW is being pressured to reluctantly consider additional concessions in order to help their member's employers survive.

What can we expect to see from the Detroit contingent this time around?

  • Servings of humble pie - No private jets this trip, Ford CEO Alan Mullaly is driving a hybrid from Detroit to Washington DC

  • Reports filled with facts, figures, and promises - but that may be a little short on solid solutions

  • Consideration but little enthusiasm for cost cutting, contract concessions, or compensation capping

  • The sale or elimination of several brands, including Hummer, Saab, Pontiac, Saturn by GM, and Volvo by Ford, which has already sold the land Rover and Jaguar brands

What can the UAW do?

  • Concessions will be requested. The UAW feels like it already gave at the office when they agreed to a deal allowing car makers to place health care costs with the UAW in 2010 by establishing VEBA plans

From the LA Tines:

Even if the UAW agreed to more cuts, the savings to the Detroit Three might
be surprisingly small.Only a few years ago, GM's UAW payroll was well over
100,000. Today it's barely 55,000. As a result, even an across-the-board 20% pay
cut "would result in a savings of only $1.1 billion per year," said Michigan
State University professor Richard Block, a specialist in labor relations.
"That's enough to keep them going for what, two weeks?"

One possible cost-cutting move -- simply eliminating poor-selling brands
like Buick, which is down nearly 24% this year -- may be a nonstarter because of
the costs involved. Franchise contracts with dealers require the automakers to
buy them out should a brand fold; the last to do so, Oldsmobile, cost GM more
than $1 billion in payouts to dealers."The Big Three are trying earnestly to do
what's necessary to right-size, but it's not easy," said William Diehl,
president and chief executive of BBK, a consulting firm specializing in auto
industry restructuring.

Shelly Lombard, an auto analyst at debt research firm Gimme Credit,
suggested that the Big Three should ask for more than the $25 billion now
proposed."I'm not sure what they're looking for is enough," she said. "The last
thing you want to do is come back for more, because then you'll really get
kicked in the teeth."

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