US automaker Ford Motor Co. will shutter one of its manufacturing plants in Canada in 2011, a move that will cut 1,400 jobs, the Canadian Auto Workers said Friday.
As part of a cost-reduction agreement between the company's US headquarters and the CAW, the plant in St. Thomas, Ontario, will close in the third quarter of 2011, the powerful union said in a statement.
Some 1,400 employees will be dismissed, CAW spokeswoman Shannon Devine told AFP. Canadian media put the number of jobs eliminated at 1,600.
As part of the tentative agreement the union said it obtained a commitment by the US automaker to keep at least 10 percent of its North American production in Canada.
"During the negotiations, Ford threatened that if we didn't come to an agreement, the company would begin shifting investment out of Canada," said Ken Lewenza, president of the CAW.
"In today's globalized economy where companies attempt to bypass community commitments, it's crucial that we don't allow this to happen."
The agreement, which expires in September 2012, is expected to be voted on and approved Sunday by the CAW's 7,000 Ford workers in Canada.
The St. Thomas plant produces the Ford Crown Victoria -- a model routinely chosen by US police forces and New York taxis -- as well as the Mercury Grand Marquis.
Although Ford did not accept bailout money from the US government like Chrysler and General Motors did, the CAW said Ford followed the pattern set out earlier in the year by its US rivals to cut significant portions of their Canada operations as part of restructuring.
Chrysler and GM both filed for bankruptcy and received billions of dollars in US government aid. Canada's government also pumped billions of dollars into the companies as part of packages to keep their auto manufacturing operations here afloat.
As part of the new deal, the CAW agreed to a reduction in holidays and a requirement for workers to contribute to the company's pension fund at the rate of one dollar for every hour worked, Devine said.
Ford for its part made new production and investment commitments in several manufacturing locations in Canada, including production of "at least two new-generation vehicles in the next product cycle" at its Oakville plant outside Toronto.
"This footprint commitment was an important achievement for the union," Lewenza said.
But Ford stood firm on closure of the St. Thomas plant.
"Nothing was harder... than coming to the realization that regardless of whatever suggestions the union came up with to save the St. Thomas facility, Ford would be closing the plant," said Mike Vince, chairman of the CAW-Ford bargaining committee and president of CAW Local 200.
Ford committed to funding and opening a center to assist workers unemployed after the plant closure.
Agencies
Showing posts with label General Motors. Show all posts
Showing posts with label General Motors. Show all posts
Saturday, October 31, 2009
Friday, September 25, 2009
GM, Reva to jointly roll out more electric vehicles
The Indian arm of General Motors (GM) Thursday said it is partnering Bangalore-based electric car maker Reva to develop and produce electric vehicles for the Indian market.
According to General Motors India managing director Karl Slym, the initiative was "in line with government objectives to reduce fossil fuel dependence".
"We are going to work closely with the central and state governments in India to develop infrastructure for electric vehicles charging and providing specific financial benefits to consumers," Slym said.
Describing electric vehicles as "a growth area around the global automotive industry", GM's president of international operations Nick Reilly said: "This cooperation with Reva in India will accelerate GM's progress to meet the emerging needs in many parts of the world."
Reilly said his company was pursuing several energy alternatives and advanced technology options to meet the changing needs of customers around the world.
"Electrically driven vehicles, based on battery and hydrogen fuel cell technology, offer the best long-term solution for providing sustainable personal transportation," he added.
The two companies have already started the feasibility study of GM's vehicle platforms to produce electric cars and are expected to announce the details shortly.
Reva had launched its electric car in 2001.
GM India, which has been unaffected by the bankruptcy proceedings of its parent in the US, is central to the company's global growth strategy.
Agencies
According to General Motors India managing director Karl Slym, the initiative was "in line with government objectives to reduce fossil fuel dependence".
"We are going to work closely with the central and state governments in India to develop infrastructure for electric vehicles charging and providing specific financial benefits to consumers," Slym said.
Describing electric vehicles as "a growth area around the global automotive industry", GM's president of international operations Nick Reilly said: "This cooperation with Reva in India will accelerate GM's progress to meet the emerging needs in many parts of the world."
Reilly said his company was pursuing several energy alternatives and advanced technology options to meet the changing needs of customers around the world.
"Electrically driven vehicles, based on battery and hydrogen fuel cell technology, offer the best long-term solution for providing sustainable personal transportation," he added.
The two companies have already started the feasibility study of GM's vehicle platforms to produce electric cars and are expected to announce the details shortly.
Reva had launched its electric car in 2001.
GM India, which has been unaffected by the bankruptcy proceedings of its parent in the US, is central to the company's global growth strategy.
Agencies
Tuesday, August 25, 2009
GM's Hummer now a likely target of Chinese
General Motors may sign an agreement for the sale of the Hummer sport-utility vehicle business to Sichuan Tengzhong Heavy Industrial Machinery Co based in Chengdu, China this week, said two people familiar with negotiations.
The China firm's executives are expected to arrive in Detroit early this week for more negotiations with GM. Meanwhile GM's advisers are recommending the board consider spurning a German-backed sale of its Opel unit to retain a bigger presence in Europe and Russia.
Agencies
The China firm's executives are expected to arrive in Detroit early this week for more negotiations with GM. Meanwhile GM's advisers are recommending the board consider spurning a German-backed sale of its Opel unit to retain a bigger presence in Europe and Russia.
Agencies
Tuesday, August 11, 2009
GM, eBay to test online market to sell new cars
General Motors Co and eBay Inc are launching a test program in California that will allow consumers to negotiate with dealers and buy
new vehicles online, the companies said on Monday.
The car shopping website, gm.ebay.com, marks a departure from the way new vehicles have traditionally been sold in the United States and is aimed at helping GM recapture lost market share a month after it emerged from bankruptcy.
The online marketplace provides the No 1 US automaker with a new venue to sell new vehicles as it cuts the number of US dealerships by more than 40 percent to 3,600 by the end of 2010 as part of its efforts to return to profitability.
It also expands an existing partnership covering GM's certified used vehicles sold through eBay. Most of the vehicles sold on eBay Motors, a site that sells various types of vehicles and auto parts, have been used.
More than 225 GM dealers in California are participating in the program, which will run from Aug. 11 through Sept 8. GM said it intends to expand the program nationwide if the pilot helps it reach new customers and gain market share.
The website allows consumers to compare pricing across models and participating dealerships, negotiate prices, and arrange financing and payment. Consumers can agree to pay the advertised price or indicate the price they are willing to pay and can negotiate online with the dealer for the vehicle.
More than 20,000 new Chevrolet, Buick, GMC and Pontiac vehicles will be listed initially on the site.
California, which has been dominated by import brands over the past several years, is the most populous US state and the single largest market for new vehicles. Car sales have been hit harder in California than in other states over the past quarter because of the severity of the housing market slump there.
"It's a critical market for us and critical time for the company. Anything we can do to provide exposure to the products where we are underserved is clearly good news," GM US sales chief Mark LaNeve said on a conference call. "It's been incredibly hit by the recession. We think it really needs a shot in the arm," he said.
GM's market share in California is hovering in the 13 percent to 13.5 percent range, trailing its national average of 19.5 percent. GM, which lost $82 billion over the past four years, is trying to revamp its image and win back consumer trust after completing a bankruptcy restructuring steered by the Obama administration.
GM has lost market share for years to import brands led by Toyota Motor Corp, now No 2 in the US market with a 17 percent share. A recent J.D. Power & Associates study said more than 75 percent of new vehicle buyers in 2008 used the Internet during their shopping and research process, compared with 70 percent in 2007.
The decline in US auto sales to their lowest level in nearly three decades this year has hurt automakers, parts suppliers, dealers and virtually every company in the automotive sector, including eBay.
The online auction company's gross merchandise volume, a data point closely watched by analysts that measures the total value of goods sold on eBay, has been hit in recent years as the downturn in auto sales continued.
Agencies
new vehicles online, the companies said on Monday.
The car shopping website, gm.ebay.com, marks a departure from the way new vehicles have traditionally been sold in the United States and is aimed at helping GM recapture lost market share a month after it emerged from bankruptcy.
The online marketplace provides the No 1 US automaker with a new venue to sell new vehicles as it cuts the number of US dealerships by more than 40 percent to 3,600 by the end of 2010 as part of its efforts to return to profitability.
It also expands an existing partnership covering GM's certified used vehicles sold through eBay. Most of the vehicles sold on eBay Motors, a site that sells various types of vehicles and auto parts, have been used.
More than 225 GM dealers in California are participating in the program, which will run from Aug. 11 through Sept 8. GM said it intends to expand the program nationwide if the pilot helps it reach new customers and gain market share.
The website allows consumers to compare pricing across models and participating dealerships, negotiate prices, and arrange financing and payment. Consumers can agree to pay the advertised price or indicate the price they are willing to pay and can negotiate online with the dealer for the vehicle.
More than 20,000 new Chevrolet, Buick, GMC and Pontiac vehicles will be listed initially on the site.
California, which has been dominated by import brands over the past several years, is the most populous US state and the single largest market for new vehicles. Car sales have been hit harder in California than in other states over the past quarter because of the severity of the housing market slump there.
"It's a critical market for us and critical time for the company. Anything we can do to provide exposure to the products where we are underserved is clearly good news," GM US sales chief Mark LaNeve said on a conference call. "It's been incredibly hit by the recession. We think it really needs a shot in the arm," he said.
GM's market share in California is hovering in the 13 percent to 13.5 percent range, trailing its national average of 19.5 percent. GM, which lost $82 billion over the past four years, is trying to revamp its image and win back consumer trust after completing a bankruptcy restructuring steered by the Obama administration.
GM has lost market share for years to import brands led by Toyota Motor Corp, now No 2 in the US market with a 17 percent share. A recent J.D. Power & Associates study said more than 75 percent of new vehicle buyers in 2008 used the Internet during their shopping and research process, compared with 70 percent in 2007.
The decline in US auto sales to their lowest level in nearly three decades this year has hurt automakers, parts suppliers, dealers and virtually every company in the automotive sector, including eBay.
The online auction company's gross merchandise volume, a data point closely watched by analysts that measures the total value of goods sold on eBay, has been hit in recent years as the downturn in auto sales continued.
Agencies
Thursday, February 12, 2009
Will General Motors layoff 10,000 salaried jobs?
General Motors Corp. said on Tuesday it will cut 10,000 salaried jobs, citing the need to restructure itself with a government deadline looming and amid some of the worst sales in the auto industry's history.
The Detroit-based automaker said it will reduce its total number of salaried workers to 63,000 from 73,000 this year. About 3,400 of GM's 29,500 salaried U.S. jobs are expected to be eliminated.
The company's statement said that the separations would be done through GM's severance plan, so there would be no buyout or early retirement packages as GM had offered in the past.
In its plan to Congress submitted late last year, GM said work force reductions would be necessary in order for it to be viable for the long term. Most of the cuts are expected to take place by May 1.
GM said the cuts will vary by global regions depending on staffing levels and market conditions.
In addition, GM said it will cut the pay of most of its salaried U.S. workers beginning May 1 and continuing at least through the end of the year at which time the pay cuts will be evaluated.
The pay of U.S. executive employees will be cut by 10 percent, while other salaried workers will see cuts of 3 percent to 7 percent, GM said.
GM faces a Feb. 17 deadline to present to the government a plan showing it can become viable. The plan is required by the terms of $9.4 billion in low-interest government loans to the wounded automaker, which is seeking another $4 billion from the Treasury Department.
The automaker is negotiating with bondholders and the United Auto Workers union for concessions and it is planning to close several factories. To prove its viability, it must show an ability to repay the loans and prove "positive net present value."
Agencies
The Detroit-based automaker said it will reduce its total number of salaried workers to 63,000 from 73,000 this year. About 3,400 of GM's 29,500 salaried U.S. jobs are expected to be eliminated.
The company's statement said that the separations would be done through GM's severance plan, so there would be no buyout or early retirement packages as GM had offered in the past.
In its plan to Congress submitted late last year, GM said work force reductions would be necessary in order for it to be viable for the long term. Most of the cuts are expected to take place by May 1.
GM said the cuts will vary by global regions depending on staffing levels and market conditions.
In addition, GM said it will cut the pay of most of its salaried U.S. workers beginning May 1 and continuing at least through the end of the year at which time the pay cuts will be evaluated.
The pay of U.S. executive employees will be cut by 10 percent, while other salaried workers will see cuts of 3 percent to 7 percent, GM said.
GM faces a Feb. 17 deadline to present to the government a plan showing it can become viable. The plan is required by the terms of $9.4 billion in low-interest government loans to the wounded automaker, which is seeking another $4 billion from the Treasury Department.
The automaker is negotiating with bondholders and the United Auto Workers union for concessions and it is planning to close several factories. To prove its viability, it must show an ability to repay the loans and prove "positive net present value."
Agencies
Tuesday, February 10, 2009
GM to cut 10,00 salaried jobs
General Motors says it's cutting 10,000 salaried jobs, blaming the need to restructure the company amid the continued drop in new vehicle sales.
The Detroit-based automaker says it will reduce its total number of salaried workers to 63,000 from 73,000 this year. About 3,400 of GM's 29,500 salaried US jobs are expected to be eliminated.
The job cuts are part of the restructuring plan GM submitted to Congress late last year. Most of the cuts are expected to take place by May 1.
GM says the cuts will vary by global regions depending on staffing levels and market conditions.
GM also is cutting the pay of most of its salaried U.S. workers beginning May 1 and continuing at least through the end of the year.
Agencies
The Detroit-based automaker says it will reduce its total number of salaried workers to 63,000 from 73,000 this year. About 3,400 of GM's 29,500 salaried US jobs are expected to be eliminated.
The job cuts are part of the restructuring plan GM submitted to Congress late last year. Most of the cuts are expected to take place by May 1.
GM says the cuts will vary by global regions depending on staffing levels and market conditions.
GM also is cutting the pay of most of its salaried U.S. workers beginning May 1 and continuing at least through the end of the year.
Agencies
Has China overtakes US as largest auto market?
China overtook the United States as the largest auto market in the world in January, according to data published by Chinese state media on Tuesday.
A total of 735,000 automobiles were sold in China last month, state television said, citing Dong Yang, deputy director of the China Association of Automobile Manufacturers.
By contrast, 656,976 vehicles were sold last month in the United States, according to preliminary estimates issued last week by market research firm Autodata.
Agencies
A total of 735,000 automobiles were sold in China last month, state television said, citing Dong Yang, deputy director of the China Association of Automobile Manufacturers.
By contrast, 656,976 vehicles were sold last month in the United States, according to preliminary estimates issued last week by market research firm Autodata.
Agencies
Sunday, January 4, 2009
Chrysler gets $4-billion loan from US govt
Chrysler LLC said on Friday it has received an initial $4 billion emergency loan from the US government.
"This initial loan will allow the company to continue an orderly restructuring," Chrysler Chief Executive Bob Nardelli said in a statement.
But Chrysler later said its statement that talks continue between the US Treasury Department and Chrysler Financial about a loan should have been omitted.
Its earlier press release said a closing was expected in due course.
Two spokeswomen for the company could not immediately be reached by the media to clarify.
General Motors Corp received $4 billion in emergency loans on December 31.
Both Chrysler and GM have said they need the government cash to meet payouts to suppliers at a time when a plunge in auto sales has drained their cash holdings.
Under terms of the government bailout, Chrysler and GM will have to submit restructuring plans by mid-February and demonstrate that they are viable by the end of March.
Source: Agencies
"This initial loan will allow the company to continue an orderly restructuring," Chrysler Chief Executive Bob Nardelli said in a statement.
But Chrysler later said its statement that talks continue between the US Treasury Department and Chrysler Financial about a loan should have been omitted.
Its earlier press release said a closing was expected in due course.
Two spokeswomen for the company could not immediately be reached by the media to clarify.
General Motors Corp received $4 billion in emergency loans on December 31.
Both Chrysler and GM have said they need the government cash to meet payouts to suppliers at a time when a plunge in auto sales has drained their cash holdings.
Under terms of the government bailout, Chrysler and GM will have to submit restructuring plans by mid-February and demonstrate that they are viable by the end of March.
Source: Agencies
Saturday, January 3, 2009
Will US Treasury mull Citi-style rescues to auto giants?
The US Treasury Department has given itself free rein in deciding the rescues of companies in the finance and auto sectors, according to two Treasury statements published this week.
The Treasury on Friday released guidelines for its Targeted Investment Program (TIP), part of emergency legislation enacted in early October to ease a credit crunch from the worst global financial meltdown since the Great Depression.
In the statement, the Treasury outlined the principles of the program under which it rescued ailing banking giant Citigroup on November 23.
Under TIP, the Treasury said it would determine the eligibility of participants and the allocation of resources "on a case-by-case basis."
"Treasury may invest in any financial instrument, including debt, equity, or warrants, that the secretary of the Treasury determines to be a troubled asset, after consultation with the chairman of the board of governors of the Federal Reserve System and notice to Congress," the department said.
Among the criteria in determining a financial firm's eligibility is "whether the institution is sufficiently important to the nation's financial and economic system that a loss of confidence in the firm's financial position could potentially cause major disruptions to credit markets ... or lead to similar losses of confidence or financial market stability that could materially weaken overall economic performance."
Wednesday, the Treasury Department posted on its website a description of its Automotive Industry Financing Program, justifying after the fact its decision to lend a combined 13.4 billion dollars in TARP funds to embattled automakers General Motors and Chrysler to stave off their imminent collapse.
"The objective of this program is to prevent a significant disruption of the American automotive industry that poses a systemic risk to financial market stability and will have a negative effect on the real economy of the United States," it said.
Similar to its approach to the finance industry, the Treasury said it would determine eligibility of participants in the program on a case-by-case basis.
The Treasury announced on December 19 a massive rescue of cash-strapped GM and Chrysler, facing a threat of imminent bankruptcy that could create economic chaos and throw millions out of work across the country.
Source: Agencies
The Treasury on Friday released guidelines for its Targeted Investment Program (TIP), part of emergency legislation enacted in early October to ease a credit crunch from the worst global financial meltdown since the Great Depression.
In the statement, the Treasury outlined the principles of the program under which it rescued ailing banking giant Citigroup on November 23.
Under TIP, the Treasury said it would determine the eligibility of participants and the allocation of resources "on a case-by-case basis."
"Treasury may invest in any financial instrument, including debt, equity, or warrants, that the secretary of the Treasury determines to be a troubled asset, after consultation with the chairman of the board of governors of the Federal Reserve System and notice to Congress," the department said.
Among the criteria in determining a financial firm's eligibility is "whether the institution is sufficiently important to the nation's financial and economic system that a loss of confidence in the firm's financial position could potentially cause major disruptions to credit markets ... or lead to similar losses of confidence or financial market stability that could materially weaken overall economic performance."
Wednesday, the Treasury Department posted on its website a description of its Automotive Industry Financing Program, justifying after the fact its decision to lend a combined 13.4 billion dollars in TARP funds to embattled automakers General Motors and Chrysler to stave off their imminent collapse.
"The objective of this program is to prevent a significant disruption of the American automotive industry that poses a systemic risk to financial market stability and will have a negative effect on the real economy of the United States," it said.
Similar to its approach to the finance industry, the Treasury said it would determine eligibility of participants in the program on a case-by-case basis.
The Treasury announced on December 19 a massive rescue of cash-strapped GM and Chrysler, facing a threat of imminent bankruptcy that could create economic chaos and throw millions out of work across the country.
Source: Agencies
Thursday, January 1, 2009
General Motors gets first tranche of US loan
General Motors Corp received its first multibillion dollar loan installment from the US Treasury Department Wednesday night, right in time to avert a financial disaster in which the struggling automaker may have been unable to sustain operations and pay suppliers.
``Treasury today finalized the loan transaction for GM and funded the first tranche of $4 billion,'' said Treasury spokeswoman Brookly McLaughlin in a written statement. The funds are the first portion of $9.4 billion in low-cost loans that GM is expected to receive from the government.
The Detroit automaker had been working feverishly with Treasury officials to close on the first loan installment. The money will be available for GM to use almost immediately. The cash-strapped Detroit company plans to use the money for continuing its operations.
GM is obligated to a make a large payment to a major supplier in early January, but has declined to offer details on the amount of money it owes or to which supplier.
``We appreciate the Administration extending a financial bridge to GM at this critical time for the US auto industry,'' said GM in a written statement shortly after the Treasury announcement. ``We are committed to successfully executing the viability plan we submitted on December 2 and remain confident in the future of General Motors.''
The loans come from the $700 billion bank rescue plan, approved by Congress in September. President George W Bush said earlier this month that the ailing automakers could tap part of those funds in the form of low-interest loans.
GM is burning through approximately $33 million a day, based on spending $1 billion per month during the third quarter. That daily amount is likely lower for the fourth quarter as GM has reduced spending on operations, sponsorships, utilities and even office supplies.
GM previously said it might not make it through the end of the year before running out of cash without government aid.
Auburn Hills, Michigan-based Chrysler LLC is expecting $4 billion in cash as well, but the Treasury has yet to announce the closing of the first round of loan money.
``We're working expeditiously with Chrysler to finalize that transaction and we remain committed to closing it on a timeline that will meet near term funding needs,'' McLaughlin said.
Chrysler is nearing the minimum level of cash, $2.5 billion, it needs to operate. Chrysler is already fending off angry parts suppliers and other vendors demanding cash payments on delivery. It generally pays suppliers $7 billion every 45 days.
Chrysler issued a statement Wednesday night, updating the status of its talks with the Treasury.
``We recognize the magnitude of the effort by the Treasury Department to complete these multiple financial arrangements quickly and sequentially,'' the company wrote in a press release. ``The discussions relating to Chrysler have been positive and productive, and we look forward to finalizing the details of our financial assistance in the immediate future.''
Dearborn, Michigan-based Ford Motor Co. said it does not intend to use government money to fund operations, as it is in a better financial position than its competitors. The Detroit automakers are trying to weather the biggest auto sales slump in more than 26 years.
Shares of GM fell 15.8 percent Wednesday, or 60 cents to $3.20, before the Treasury's announcement. Shares of Ford closed unchanged at $2.29.
Earlier this week, GM's financial arm, GMAC Financial Services, received $5 billion in aid from the Treasury Department. In addition, the Treasury said it would lend up to $1 billion to GM so that the automaker would be able to buy more equity from GMAC. Those purchases are expected to raise more capital for GMAC, and separate from the $4 billion received from the Treasury Wednesday.
Source: Agencies
``Treasury today finalized the loan transaction for GM and funded the first tranche of $4 billion,'' said Treasury spokeswoman Brookly McLaughlin in a written statement. The funds are the first portion of $9.4 billion in low-cost loans that GM is expected to receive from the government.
The Detroit automaker had been working feverishly with Treasury officials to close on the first loan installment. The money will be available for GM to use almost immediately. The cash-strapped Detroit company plans to use the money for continuing its operations.
GM is obligated to a make a large payment to a major supplier in early January, but has declined to offer details on the amount of money it owes or to which supplier.
``We appreciate the Administration extending a financial bridge to GM at this critical time for the US auto industry,'' said GM in a written statement shortly after the Treasury announcement. ``We are committed to successfully executing the viability plan we submitted on December 2 and remain confident in the future of General Motors.''
The loans come from the $700 billion bank rescue plan, approved by Congress in September. President George W Bush said earlier this month that the ailing automakers could tap part of those funds in the form of low-interest loans.
GM is burning through approximately $33 million a day, based on spending $1 billion per month during the third quarter. That daily amount is likely lower for the fourth quarter as GM has reduced spending on operations, sponsorships, utilities and even office supplies.
GM previously said it might not make it through the end of the year before running out of cash without government aid.
Auburn Hills, Michigan-based Chrysler LLC is expecting $4 billion in cash as well, but the Treasury has yet to announce the closing of the first round of loan money.
``We're working expeditiously with Chrysler to finalize that transaction and we remain committed to closing it on a timeline that will meet near term funding needs,'' McLaughlin said.
Chrysler is nearing the minimum level of cash, $2.5 billion, it needs to operate. Chrysler is already fending off angry parts suppliers and other vendors demanding cash payments on delivery. It generally pays suppliers $7 billion every 45 days.
Chrysler issued a statement Wednesday night, updating the status of its talks with the Treasury.
``We recognize the magnitude of the effort by the Treasury Department to complete these multiple financial arrangements quickly and sequentially,'' the company wrote in a press release. ``The discussions relating to Chrysler have been positive and productive, and we look forward to finalizing the details of our financial assistance in the immediate future.''
Dearborn, Michigan-based Ford Motor Co. said it does not intend to use government money to fund operations, as it is in a better financial position than its competitors. The Detroit automakers are trying to weather the biggest auto sales slump in more than 26 years.
Shares of GM fell 15.8 percent Wednesday, or 60 cents to $3.20, before the Treasury's announcement. Shares of Ford closed unchanged at $2.29.
Earlier this week, GM's financial arm, GMAC Financial Services, received $5 billion in aid from the Treasury Department. In addition, the Treasury said it would lend up to $1 billion to GM so that the automaker would be able to buy more equity from GMAC. Those purchases are expected to raise more capital for GMAC, and separate from the $4 billion received from the Treasury Wednesday.
Source: Agencies
Saturday, December 20, 2008
Finally bailout approved: Automakers to get $17.4 bn
Citing danger to the national economy, the Bush administration approved an emergency bailout of the US auto industry on Friday, offering $17.4 billion in rescue loans in exchange for concessions from the deeply troubled carmakers and their workers.
The government will have the option of becoming a stockholder in the companies, much as it has with major banks, in effect partially nationalizing the industry.
At the same time, Treasury Secretary Henry Paulson said Congress should release the second $350 billion from the financial rescue fund that it approved in October to bail out huge financial institutions. Tapping the fund for the auto industry basically exhausts the first half of the $700 billion total, he said.
President Bush said, "Allowing the auto companies to collapse is not a responsible course of action." Bankruptcy, he said, would deal "an unacceptably painful blow to hardworking Americans" across the economy.
One official said $13.4 billion of the money would be available this month and next, $9.4 billion for General Motors Corp. and $4 billion for Chrysler LLC. Both companies have said they soon might be unable to pay their bills without federal help. Ford Motor Co. has said it does not need immediate help.
Bush's plan is designed to keep the auto industry running in the short term, passing the longer-range problem on to the incoming administration of President-elect Barack Obama.
Bush said the rescue package demanded concessions similar to those outlined in a bailout plan that was approved by the House but rejected by the Senate a week ago. It would give the automakers three months to come up with restructuring plans to become viable companies.
If they fail to produce a plan by March 31, the automakers will be required to repay the loans, which they would find very difficult.
"The time to make hard decisions to become viable is now, or the only option will be bankruptcy," Bush said. "The automakers and unions must understand what is at stake and make hard decisions necessary to reform."
He said the companies' workers should agree to wage and work rules that are competitive with foreign automakers by the end of next year.
And he called for elimination of a "jobs bank" program — negotiated by the United Auto Workers and the companies — under which laid-off workers receive unemployment benefits and supplemental pay from their companies for 48 weeks. If they remain laid off beyond that, they move to a jobs bank in which the company provides about 95% of their pay and benefits. Until the most recent contract, people could remain in the jobs bank for years. Early this month, the UAW agreed to suspend the program.
Under terms of the loan, GM and Chrysler must provide the government with stock warrants giving it the option to buy GM and Chrysler stock at a specific price.
In addition, the automakers would be required to agree to limits on executive pay and eliminate some perks such as corporate jets.
Paulson said that with the help for the carmakers, the government will have allocated the first half of the largest government bailout program in history.
He said he was confident that the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. have the resources to address a significant market crisis if one should occur before Congress approves the use of the second half of the rescue fund.
Paulson said he would discuss the process with congressional leaders and Obama's transition team "in the near future.
Source: Agencies
The government will have the option of becoming a stockholder in the companies, much as it has with major banks, in effect partially nationalizing the industry.
At the same time, Treasury Secretary Henry Paulson said Congress should release the second $350 billion from the financial rescue fund that it approved in October to bail out huge financial institutions. Tapping the fund for the auto industry basically exhausts the first half of the $700 billion total, he said.
President Bush said, "Allowing the auto companies to collapse is not a responsible course of action." Bankruptcy, he said, would deal "an unacceptably painful blow to hardworking Americans" across the economy.
One official said $13.4 billion of the money would be available this month and next, $9.4 billion for General Motors Corp. and $4 billion for Chrysler LLC. Both companies have said they soon might be unable to pay their bills without federal help. Ford Motor Co. has said it does not need immediate help.
Bush's plan is designed to keep the auto industry running in the short term, passing the longer-range problem on to the incoming administration of President-elect Barack Obama.
Bush said the rescue package demanded concessions similar to those outlined in a bailout plan that was approved by the House but rejected by the Senate a week ago. It would give the automakers three months to come up with restructuring plans to become viable companies.
If they fail to produce a plan by March 31, the automakers will be required to repay the loans, which they would find very difficult.
"The time to make hard decisions to become viable is now, or the only option will be bankruptcy," Bush said. "The automakers and unions must understand what is at stake and make hard decisions necessary to reform."
He said the companies' workers should agree to wage and work rules that are competitive with foreign automakers by the end of next year.
And he called for elimination of a "jobs bank" program — negotiated by the United Auto Workers and the companies — under which laid-off workers receive unemployment benefits and supplemental pay from their companies for 48 weeks. If they remain laid off beyond that, they move to a jobs bank in which the company provides about 95% of their pay and benefits. Until the most recent contract, people could remain in the jobs bank for years. Early this month, the UAW agreed to suspend the program.
Under terms of the loan, GM and Chrysler must provide the government with stock warrants giving it the option to buy GM and Chrysler stock at a specific price.
In addition, the automakers would be required to agree to limits on executive pay and eliminate some perks such as corporate jets.
Paulson said that with the help for the carmakers, the government will have allocated the first half of the largest government bailout program in history.
He said he was confident that the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. have the resources to address a significant market crisis if one should occur before Congress approves the use of the second half of the rescue fund.
Paulson said he would discuss the process with congressional leaders and Obama's transition team "in the near future.
Source: Agencies
Saturday, December 13, 2008
General Motors calls on UK Govt to rescue it
General Motors, which employs 5,500 people around the UK, is in talks with the British government to secure cash to allow it to continue operating in what the car maker admits are "critical" conditions.
A report in The Telegraph says that the talks follow a decision by the US Congress to vote down a 14 billion dollar loan package to support the American automotive industry on Friday.
The future of British workers at GM plants in Luton and on Merseyside is unclear, as does that of up to a further 5,500 people employed by parts suppliers.
The Gordon Brown Government is likely to take a cautious approach to requests to bail out the UK car industry. It is thought more likely to consider offering bridging loans.
GM said it was "very disappointed" with the US loan package's failure, but continued to "look at options to restructure and stabilize the business in this exceptionally difficult economic period." It claimed to be operating "as usual".
The car maker, which owns brands including Vauxhall, Saab and Opel, said it was in talks with unions and European governments in countries where it has big operations to "provide liquidity for sustaining operations".
Underlining the urgency of the situation, GM said it would seek liquidity "while the US team pursues its options".
GM is also in talks with the German government, where it has Opel production facilities, in a bid to secure a credit guarantee.
The Swedish government yesterday announced a 28 billion Kronor support package to help the car industry. The plan offers credit guarantees, emergency loans and research funds to companies from Volvo to Saab.
Volvo is owned by Ford, which faces similar problems as does GM and Chrsyler.
According to The Telegraph, the Spanish region of Aragon, where GM has an Opel plant, has offered its own 200 million Euros credit guarantee.
Source; Agencies
A report in The Telegraph says that the talks follow a decision by the US Congress to vote down a 14 billion dollar loan package to support the American automotive industry on Friday.
The future of British workers at GM plants in Luton and on Merseyside is unclear, as does that of up to a further 5,500 people employed by parts suppliers.
The Gordon Brown Government is likely to take a cautious approach to requests to bail out the UK car industry. It is thought more likely to consider offering bridging loans.
GM said it was "very disappointed" with the US loan package's failure, but continued to "look at options to restructure and stabilize the business in this exceptionally difficult economic period." It claimed to be operating "as usual".
The car maker, which owns brands including Vauxhall, Saab and Opel, said it was in talks with unions and European governments in countries where it has big operations to "provide liquidity for sustaining operations".
Underlining the urgency of the situation, GM said it would seek liquidity "while the US team pursues its options".
GM is also in talks with the German government, where it has Opel production facilities, in a bid to secure a credit guarantee.
The Swedish government yesterday announced a 28 billion Kronor support package to help the car industry. The plan offers credit guarantees, emergency loans and research funds to companies from Volvo to Saab.
Volvo is owned by Ford, which faces similar problems as does GM and Chrsyler.
According to The Telegraph, the Spanish region of Aragon, where GM has an Opel plant, has offered its own 200 million Euros credit guarantee.
Source; Agencies
Tuesday, November 25, 2008
US govt bails out Citigroup, but will it survive?
“Amazing how much damage the lame ducks can do in the time remaining.” — Paul Krugman, Noble Prize Winner in Economics, on the bailout of Citigroup by the incumbent US government
America’s cup of woes is spilling over, rather messily, with its long-venerated financial institutions suddenly faced with obliteration and forced to seek a bailout.
Citigroup, the latest in a list getting longer, has just been promised a $20 billion cash injection, besides a whopping government guarantee for its troubled assets and mortgages.
As its stock price fell 60% over last week, the world’s largest financial services firm with revenues of around $159 billion last year, kept repeating over and over that it had “very strong capital.”
US govt agrees to $306-b rescue plan for Citigroup
It took just one weekend for it to go from very strong to very weak, necessitating a bailout of this order.
On Friday, the stock tumbled by over 60% to $3.77, down from a peak of $56 in 2006.
Predictably, the bailout news did it some good on Monday. At the time of writing this piece, the stock had gained around 61% to $6.08 on the New York Stock Exchange.
Barclays gets $10 b as Citi rescue resounds
DNA Money attempts an overview of the situation, the intervention and its implications near and far.
What’s the rescue all about?
The US government has decided to guarantee $306 billion of troubled mortgages and other assets of Citigroup. The Treasury department will also inject $20 billion of cash into the firm.
This will be over and above the $25 billion Citigroup got under the Troubled Asset Relief Programme (TARP, as the $700 billion bailout package is officially named).
On its part, the firm will issue preferred shares worth $27 billion to the government and pay a dividend of 8% a year.
Analysts following the firm have been expecting this move. “While the conventional wisdom says Citi is too big to fail, the reality is it’s too big to manage,” wrote Vernon Hill, founder and former chairman, president, and chief executive officer of Commerce Bancorp on www. seekingalpha.com a couple of days back.
“As a result, the company has become a publicly traded incarnation of Murphy’s Law: anything that can go wrong almost certainly will — and probably sooner rather than later. And $25 billion in TARP money isn’t going to do much to turn things around.”
What will be the cost of the bailout?
Citibank will have to pay a dividend of $2.16 billion per year to the government on the preferred shares. It will also have to pay $1.25 billion @5% on the $25 billion it received through TARP. This means the bank will have to make a profit of more than $3.41 billion before the shareholders can take home anything.
Citigroup shareholders will be diluted in the “near term by the cost of the incremental preferred stock,” Morgan Stanley analysts Betsy Graseck and Cheryl Pate wrote in a report on Monday.
Who will absorb the losses?
Citigroup will have to absorb the losses to the extent of $29 billion, including the reserves. Beyond that, any losses will be shared between the government and Citi. The government, through its three agencies — the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp — will take on 90% of the losses, leaving 10% for Citi to bear.
What are the conditions associated with the bailout?
Under the terms of the deal, the institution has been prohibited from paying common stock dividends of more than $.01 per share per quarter, for the next three years, without the approval of the US government. Further, any executive compensation plan including bonuses to employees must get the approval of the US government.
But experts aren’t happy with this move. Robert Reich, a former labour secretary of the US government under Bill Clinton wrote on his blog : “This is not a particularly good deal for American taxpayers, but it is a marvellous deal for Citi… The senior executives of Citi, including those who have served at the highest levels in the US government, have done their jobs exceedingly well.”
Ironically, the same executives who got Citi into the mess in the first place, continue.
Who was responsible for the mess?
Like other banks and financial institutions in the US, Citigroup also got carried away while investing in sub-prime mortgages. Also, its risk management system had stopped working.
New York Times said in a report said that Charles O Prince III, Citigroup’s chief executive before Vikram Pandit took over, learnt for the first time in September 2007 that the bank owed $43 billion in mortgage related assets. At that point, Prince asked Thomas G Maheras who oversaw trading at the bank if things were okay.
Maheras replied in the positive, then and every time the question cropped up. By the time the risk management team of the bank got around to assessing the risk related to these mortgages, it was too late. The bank had to announce billions of dollars in losses.
Analysts are even questioning the business model of Citigroup. They feel the company had spread itself too thin. “The whole idea behind Citigroup was flawed from the start. Unbeatable scale in financial services? Forget it. We now see the good Citi’s size has done for investors: the company has an incoherent, unworkable business model. It is run by a senior management team that’s largely unproven, with scant experience, operating a large financial institution,” wrote Hill.
Will the bailout and the guarantee be enough?
This is a tricky question. Citigroup has assets worth nearly $2 trillion on its books. It also has nearly $1.23 trillion in off-balance sheet assets.
“The roughly $300 billion pool of assets that are included in the rescue plan represent only a sliver of the company’s more than $3 trillion in assets, including its holdings in off-balance-sheet entities. Jitters about such “hidden” assets helped trigger the nose-dive in Citigroup’s stock last week. Among the off-balance-sheet assets are $667 billion in mortgage-related securities,” the Wall Street Journal reported.
Also, the troubled assets are not being taken off Citigroup’s balance sheet, and this has not gone down well with analysts.
What next?
Analysts are sceptical of the bailout.
“No one knows who’s going to lead it, over the medium term; hell, nobody knows who’s going to own it, over the medium term. The US government might have guaranteed a chunk of Citi’s assets, but it’s done nothing about Citi’s liabilities, including hundreds of billions of dollars in unguaranteed deposits,” Felix Salmon, a widely followed analyst in the US wrote on www.seekingalpha.com.
“Nothing in today’s announcement makes Citi immune to a bank run, which means there’s a very good chance the stock will remain under significant pressure. Given that it was the tumbling stock price which was responsible for this deal in the first place, one wonders if there was any point to this exercise at all,” Salmon wrote.
Analysts also feel that after the Citi bailout, it will be very difficult for the US government not to bail out the likes of General Motors, where so much more is at stake.
Source: DNA Money
Saturday, November 22, 2008
General Motors will idle plants; Awaiting U.S. aid decision
General Motors Corp., under pressure after Congress delayed action on automaker aid, is idling four plants for an additional week, extending the shutdown of an engineering center and returning some corporate jets.
The closure of a truck factory in Oshawa, Ontario, is also being moved up by two months to May 14, Tony Sapienza, a spokesman for Detroit-based GM, said yesterday. The plants that will have the extra shutdown week in January are in Michigan, Ohio, Kansas and Missouri.
GM, which has said it may run short of operating cash by the end of this year, acted a day after Democratic leaders in Congress put off deciding on loans to automakers until next month. Congressional leaders want GM, Ford and Chrysler LLC to make a case for the help.
``At this point, GM is not thinking about 2015, they are thinking about 2009,'' said Mike Robinet, an analyst at CSM Worldwide Inc. in Northville, Michigan. ``Ninety percent of their decisions are focused on what they need do to bolster revenue and save cash.''
To read on ...click on the link below:
http://www.bloomberg.com/apps/news?pid=20601087&sid=a0ZU61nc9TH0&refer=home
The closure of a truck factory in Oshawa, Ontario, is also being moved up by two months to May 14, Tony Sapienza, a spokesman for Detroit-based GM, said yesterday. The plants that will have the extra shutdown week in January are in Michigan, Ohio, Kansas and Missouri.
GM, which has said it may run short of operating cash by the end of this year, acted a day after Democratic leaders in Congress put off deciding on loans to automakers until next month. Congressional leaders want GM, Ford and Chrysler LLC to make a case for the help.
``At this point, GM is not thinking about 2015, they are thinking about 2009,'' said Mike Robinet, an analyst at CSM Worldwide Inc. in Northville, Michigan. ``Ninety percent of their decisions are focused on what they need do to bolster revenue and save cash.''
To read on ...click on the link below:
http://www.bloomberg.com/apps/news?pid=20601087&sid=a0ZU61nc9TH0&refer=home
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