GM says it received $4 bn more from US Treasury
General Motors said it had received a higher-than-expected extra four billion dollars from the US Treasury, bringing the total in emergency government loans to more than $19 billion.business Updated: May 23, 2009 08:49 IST
General Motors said on Friday it had received a higher-than-expected extra four billion dollars from the US Treasury, bringing the total in emergency government loans to more than $19 billion.
"GM confirmed today that it will draw on an additional four billion dollars in US treasury loans," the company said in a statement.
The ailing number one US automaker said it is using the funds to maintain adequate liquidity as it prepares to present a viability plan to the government by the end of this month.
"Today's loan is higher than the amount forecasted in... April," the statement said.
The larger-than-expected sum comes amid reports that President Barack Obama's administration is preparing to steer the firm into bankruptcy by pushing the federal debt level to some $45 billion.
Earlier this month GM chief executive Fritz Henderson indicated that bankruptcy may be the only option left for the firm.
"Given the objectives that we've set for ourselves it's more probable that we need to accomplish our goals in a bankruptcy," he told reporters.
Ahead of the end-of-month deadline the company has moved to reach cost-cutting deals with unions and to hive off some parts of its business.
On Friday, Canadian auto parts maker Magna International and Russia's Sberbank said they were prepared to invest 700 million euros to buy GM's Opel unit, leaving the US giant with just a 35 percent stake in the firm.
GM also indicated this month it was to shrink its dealer network 40 percent, cutting some 2,300 sales outlets by the end of 2010.
The firm also has plans to temporarily close its US plants for summer, and earlier this week said three of its Mexican plants would close in May and June, affecting 7,900 of GM's 13,000 employees in Mexico.
Amid the grim outlook there has been some success in addressing labor costs.
On Thursday, the United Auto Workers union said it had reached a "tentative understanding" with the US Treasury and General Motors on contract changes, part of GM's scramble to get concessions to prove its viability.
In Canada on Friday, the company reached a similar deal with the Canadian Auto Workers Union to reduce labor costs, part of joint US and Canadian government demands to make the company more competitive vis-a-vis Japanese and European car makers.
But the company must also reach agreement with bondholders to slash its massive debt load with an equity swap. So far bondholders have brushed aside offers from the firm, insisting on a massively larger stake in the firm than that being offered.
On Friday GM hinted at further cash needs in the weeks to come.
"We appreciate President Obama's and his administration's ongoing support of GM and the domestic US auto industry as we undertake the difficult but necessary actions to reinvent our company.
"We will continue to work closely with members of the president's Auto Task Force throughout our restructuring and together we will continue to monitor our liquidity needs during this period," the statement said.