GM Could Need $30 Billion Total in Government Loans
February 17, 2009

By Michelle Krebs

DETROIT -- General Motors Corp. said on Tuesday it could need a total of as much as $30 billion in U.S. government loans, more than double its original request.

The request came as part of GM's viability plan filed with the U.S. Treasury Department late Tuesday.

In addition, GM said it had accelerated its cost-cutting plans to include a reduction of its global workforce by 47,000 people this year and close another five U.S. plants by 2012. GM will close or sell Hummer by March 31, will try to sell Saab and will wind down Saturn by 2011 unless Saturn dealers or another party takes it over. GM said it continues to negotiate with its bondholders and unions for concessions.

The Numbers

GM has already received $13.4 billion in government loans since December. It now says it needs at least $9.1 billion more or as much as $16.6 billion if the economy deteriorates further. And it needs some of that cash fast -- by next month -- to stay in business. That puts the maximum grand total at $30 billion, about double what GM originally requested.

But that's far less than GM's estimates of what it will cost if it files bankruptcy. A provision of taking the loans in the first place required GM to analyze what would happen if it filed for Chapter 11 bankruptcy as some experts and some Congressmen have urged GM to do. GM said it considered three bankruptcy scenarios in its report. One carried a price tag of $100 billion, and all were less costly than the government rescue GM is seeking.

GM, like Chrysler, insisted that while they studied the bankruptcy option as part of their reports submitted to the government, it is an option only of last resort.

The Brands

GM will decide by March 31 whether it will sell or simply close down Hummer. GM CEO Rick Wagoner told reporters GM continues to talk to potential buyers for Hummer. But if GM doesn't make a deal by the end of the quarter, it will close down Hummer. And shuttering the SUV brand won't take long, said GM President Fritz Henderson. 

Similarly, Saab is up for sale. GM has capped how much it will invest in Saab and is negotiating with the Swedish government to help finance the Swedish brand until a buyer can be found. If it can't be sold, Saab likely would be forced to file for bankruptcy, Wagoner said.

It may be the end of the line for Saturn as well. GM will wind down Saturn after its current product line comes to the end of its lifecycle -- around 2011 -- unless a buyer is found or Saturn dealers themselves decide to take it over. Saturn dealers reportedly are considering such an option. Vehicles from India and/or China could eventually find their way in to Saturn showrooms if that happens, media reports suggest.

Posted by Michelle Krebs at 3:53 PM under Featured , GM | Comments (2) | digg this | Seed Newsvine

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