U.S. automakers started to submit plans demanded by Congress as the Big Three's CEOs and lawmakers gird for debate over a $25 billion bailout the industry says it needs to survive.
Under fire for fighting fuel standards for years, the Detroit-based automakers are expected to present plans that call for them to build more fuel-efficient cars, axe unpopular brands, cap executive compensation and restructure their agreements with the United Auto Workers union.
Critics have charged that many of the Big Three's financial problems are of their own doing due to their stubborn insistence on building gas-guzzling cars that Americans no longer want, and now can no longer afford.
The automakers' proposals come on the same day they are slated to release November sales results, which are expected to be little changed from a dismal October.
Ford Motor Co became the first to release its plan, which asks for $9 billion of loans, cancels global executive bonuses and all U.S. bonuses for 2009, proposes to cut dealers and initiates plans for electric cars.
The automakers' stocks jumped following the Ford plan, which calls for the company's North American auto business to achieve pretax break-even or profitability in 2011.
"The Ford news has given the market a lift as it indicates that the automaker within two years will be back to profitability. People are … expecting the stocks to continue their upward trend on hopes of a bailout plan," said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York.
General Motors Corp's board began to review the top U.S. automaker's revamped business plan on Sunday and has been asked to endorse steps that include consideration of dropping or selling the Pontiac, Saab and Saturn brands.
Chrysler LLC, controlled by Cerberus Capital Management, said its board was meeting to review its plan. Chrysler needs to spell out a plan that would allow it to take a share of the federal funding even as it seeks a partnership with other automakers, analysts said.
"Just as General Motors is too big to fail, Chrysler is too small to survive on its own," said IHS Global Insight analyst Aaron Bragman.
For its part, the UAW is likely to be asked to give up job security guarantees for workers at U.S. plants that close and asked to renegotiate how automakers must pay into a trust fund set to take over retiree health care from 2010.
In addition, GM is almost certain to ask its bondholders to swap some portion of its existing $44 billion debt for a deeply discounted payout and some equity interest in the restructured company, analysts say.
Analysts say Detroit is gambling that plans that show labor, management, creditors and investors sharing in sacrifices at a time of crisis will win the political support that has so far eluded the companies.
"Going in it was pretty clear that the powers that be in Washington were interested in seeing the automakers come back with plans with more concessions," said Dennis Virag of the Ann Arbor, Michigan-based Automotive Consulting Group. "I think they will get the funding."
But the complicated plans for the automakers hinge on major changes that could take months to complete.
Partly for that reason, the UAW said it supports a two-step process that would see Congress approve emergency funding for the industry this week with a follow-up review next year after President-elect Barack Obama takes office.
NO PRIVATE JETS THIS TIME
The cash squeeze is most pressing at GM, which ended September with $16 billion in cash after burning through $6.9 billion in the past quarter. The automaker has said it needs a minimum of $11 billion to operate and warned it could fall short of cash by early next year.
After being pilloried for flying private jets to attend November hearings, the three auto chief executives will make alternate travel plans this time, their companies said.
Ford Chief Executive Alan Mulally will drive a Ford hybrid vehicle from Detroit. GM CEO Rick Wagoner and Chrysler CEO Bob Nardelli will both fly commercial or make other arrangements.
Mulally's call for government backing is a sharp reversal from his views as chief of Boeing Co's commercial plane unit, when he bitterly opposed state aid for rival Airbus, a unit of EADS.
"The trade case is really about a level playing field going forward," Mulally told Reuters in May 2005, after the United States launched a complaint against the European Union over state subsidies to Airbus.
Mulally called this $9 billion a bridge loan and "a critical backstop" Ford may not have to access. He said he would take a $1 annual salary if Ford uses government funds. The company also said it would sell its five corporate aircraft.
The appeal for aid will be scrutinized twice this week. The Senate Banking Committee will hold a session on Thursday, and the House Financial Services Committee on Friday.
The U.S. automakers' November results are expected to start rolling in at about midday, following disappointing monthly sales figures out of Europe earlier on Tuesday.
In Tuesday morning trade on the New York Stock Exchange, Ford shares were up about 13 percent at $2.87 and GM shares were up about 6 percent at $4.85.
