Auto-bailout tab jumps to $39 billion

DETROIT — The price tag for bailing out General Motors (GM) and Chrysler jumped by another $14 billion Tuesday, to $39 billion, with the two automakers saying they would need the additional aid from the federal government to remain solvent.

In return, the two companies also promised to make more drastic cuts to all parts of their operations, in the hope they can eventually strike a balance between their bloated cost structures and a dismal market for new car sales.

GM, for example, said it would cut 47,000 more workers worldwide, close five more plants in North America, and cut its lineup of brands in half, to just four: Chevrolet, Cadillac, GMC and Buick.

The Pontiac brand will have a much smaller role, if any, in GM's future, and the company also said it would phase out its Saturn brand, which it once hoped would build small cars to counter the best of the Japanese brands.

GM also said it had made progress in discussions with the United Automobile Workers (UAW) union and its bondholders to reduce its costs further.

The cash crisis will require fast action by the administration's new Cabinet-level Presidential Task Force on Autos, which is overseeing the reorganization of GM and Chrysler.

The deteriorating finances of the two companies present the Obama administration with two options, neither of them appealing.

It can provide the money in the hopes the companies will stabilize and no longer have to keep laying off workers. But there are no guarantees, as the Treasury Department learned Tuesday when the automakers filed updates on their restructuring plans, that they might not be forced to come back again with requests for more money.

But if the federal government balks at the automakers' requests, that would mean the two companies likely would have no choice but to file for bankruptcy, because they are losing hundreds of millions of dollars each month.

And the car companies said Tuesday the cost of a bankruptcy reorganization, with the government providing financing to help it through that process, would be far greater than their latest loan requests. With such government help, the companies would have to liquidate, creating staggering new job losses.

In a statement, the administration said Tuesday night that the task force would be reviewing the carmakers' reports in coming days, adding that "more will be required from everyone involved — creditors, suppliers, dealers, labor and auto executives themselves — to ensure the viability of these companies going forward."

The third Detroit auto company, Ford, has not received federal assistance and has no requests pending for government loans.

By March 31, the presidential task force is expected to rule on whether GM and Chrysler have restructured enough to be viable businesses for the long term.

Big questions remain, including whether GM and Chrysler, as well as Ford, will be able to cut their unionized labor costs to reach parity with foreign automakers, as was required in the original loan deal from last December.

The companies have been in marathon negotiations with the UAW on reducing costs, as well as determining how they will fund health-care trusts for retired blue-collar workers and their surviving spouses.

GM is also pushing for a deal with its bondholders to help it reduce its debt from $27 billion to $9 billion.

The UAW said Tuesday it had reached "understandings" with the Detroit companies on modifications to their contracts. Ron Gettelfinger, the union's president, said "discussions are continuing" regarding how to fund the health-care trusts at each of the companies.

GM's restructuring plan extends to its global operations. It will cut 47,000 of its 244,000 jobs worldwide by the end of this year, and will close 14 plants in North America by 2012 — five more than were included in its Dec. 2 loan request.

Wagoner said Tuesday that the revamping plan is "comprehensive, responsive and achievable," and could help the company break even by 2010.