Government Seeks Deeper Concessions from Carmakers
The US carmakers were asked by the federal government to provide more concessions to make sure the funds are properly used. Meanwhile, Chrysler and General Motors filed $5 billion and $16.6 billion additional loans from the government to keep its finances afloat despite slumping sales and weak demand.
A high-ranking White House official said that major automakers in the US are most likely to meet with President Barack Obama to discuss the administration’s plan to demand more concession in exchange for supplementary federal loans.
White House Press Secretary Robert Gibbs, according to reports, said that US automakers General Motors Corp. and Chrysler LLC are to meet with the chief executive to deal with the final decision on its operations.
Gibbs, however, refused to reveal the Obama-administration’s plan. But reports, quoting an official who does not want to be named, said that the concessions might go beyond the Bush-administration’s requirement in 2008.
Chrysler and GM filed $5 billion and $16.6 billion additional loans, respectively. Company records showed that a total of $17.4 billion government loan has already been awarded to the two car manufacturers, mainly because of the spiraling down projection of auto sales (worst in 27 years).
Another official in the Obama cabinet said that GM Executive Rick Wagoner has already met with the auto task force formed by the president to discuss the company down turn.
Under the agreement in the first loans of the company, the administration has laid down terms for them to cut cost by lowering salary rate of executives and match up with the Japanese carmakers in terms of labor costs.
Also, the agreement required the companies to gather the trust of the United Auto Workers in taking equity that will be traded for the half of the companies’ payments to the health care costs of the retirees under the union-run trust funds.
GM and Chrysler should also convince debt holders in trading two-thirds of their debt for equity.
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