Never before the Detroit Big 3 car makers have faced such a big challenge. Their financial condition worsened a lot during this year because of both the malfunction of credit market and the sharp drop in automobile sales. Without government bailout, they are likely to go bankrupt soon and cost millions of jobs in the automotive industry. Even if only one of them collapse, it will drag down countless of suppliers and eventually the other two. To persuade the congress to provide financial bailout, the Big 3 have submitted their rescue plans to Washington DC yesterday. Here below is a summary what they will do:
GM
GM will need US$18 billion loan from the government in order to prevent from bankruptcy. In particular, some $4 billion must be available within this month, showing how alarming its cash reserve level is.
To persuade the congress to accept its request, GM promises the following cost cutting measures:
- Reduce workforce from 95,000 to 65,000-75,000 people
- Reduce dealerships from 6,450 to 4,700
- Sell Saab division
- Sell Hummer division
- Sell or eliminate Saturn division
- Downsize Pontiac to a niche brand
- Negotiate with UAW to cut labor benefits
- CEO Rick Wagoner will receive $1 salary – yes, one US dollar.
Ford
The financial condition of Ford is healthier than both GM and Chrysler. It predicts it will have enough cash to survive until the end of next year. While it is seeking a government loan of US$9 billion, it hopes the loan will not be actually used. Ford forecasts its balance sheet will return to black in year 2011 through the following cost cutting measures:
- Close 6 plants in the next 3 years
- Sell Volvo division
- Negotiate with UAW to cut labor costs
- CEO Alan Mulally will receive $1 salary – yes, the same as his GM counterpart.
- Sell the company’s 5 corporate aircrafts
Chrysler
Similar to GM, the Cerberus-owned Chrysler needs money within this month to be safe from bankruptcy. The exact figure is US$7 billion. Besides, it also wants another US$6 billion from the government funding for green vehicles. For cost cut, Chrysler did not give details, only mentioning it will rationalise production, forge partnership with other car makers to share platforms and pay its CEO Bob Nardelli a salary of $1 – yes, the same as Rick Wagoner and Alan Mulally.
If your company look for a cheap yet hardworking CEO, you can look no further than Detroit. Yes, they do sometimes take corporate aircrafts to meetings and vacation, but these smart guys can get you billions of free government money.
US sales slide in November
The US auto market is experiencing the most severe sales decline in recent decades. In November, the total sales for all makers dropped 11 percent compare with October, or 37% compare with a year ago. In particular, GM dropped 41%, Chrysler 47% and Ford 31%. Even the Japanese could not escape from sharp decline – Toyota slid 34%, Honda 32% and Nissan 42%. Hyundai group suffered a 39% drop. Porsche lost 48% of sales, reflecting luxury sports cars are hit heavily by economy. Among the big car makers, only Volkswagen group (including Audi) dropped by less than 30 percent, which was 21%.
GM: -41%
Ford: -31%
Chrysler: -47%
Toyota: -34%
Honda: -32%
Nissan: -42%
Mazda: -31%
Mitsubishi: -35%
Subaru: -8%
Suzuki: -46%
Hyundai group: -39%
VW group: -21%
BMW group: -27%
Mercedes: -38%
Porsche: -48%