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Cuts loom as Chrysler, GM finish viability plans

February 10, 2009

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— Fear of more plant closures and other cuts that are likely to cost thousands of jobs is spreading through General Motors Corp. and Chrysler LLC as the companies approach a Feb. 17 deadline to show the government they can be viable.

Both companies’ plans are presumed to include concessions from bondholders and the United Auto Workers. GM’s plan will include shuttering additional factories as well as salaried pay and job cuts, according to people familiar with the plans.

Both GM and Chrysler must prove to the government that they are able to repay the federal loans that are keeping the companies afloat in the worst U.S. auto sales climate in 26 years. GM has received $9.4 billion and expects to get $4 billion more, while Chrysler has received $4 billion and is hoping to get another $3 billion.

That means the automakers will have to make substantial cost cuts. The companies are required to show the government they can achieve “positive net present value,” which means that the present value of a company’s expected net cash flows exceeds the initial investment in the company.

White-collar workers may not get buyouts or early retirement offers like they have in the past, and pay cuts could go beyond 5 percent, according to the people, who spoke on condition of anonymity because workers have yet to be notified.

GM workers across the country are dreading Feb. 17, the date that some of the plan’s details could become public.

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