General Motors is “highly confident” it can meet the financial viability test set forth in a government bailout package, the automaker's chief executive officer said Friday.
GM and Chrysler, facing a threat of imminent bankruptcy, were offered a 13.4 billion dollar rescue loan which requires tough reforms and proof of financial viability by March 31.
“I'm highly confident we'll be able to meet that test,” GM chief executive officer Rick Wagoner said at a press conference, adding that “We obviously have some big steps we have to take.”
Under the plan, GM would get 9.4 billion dollars in two tranches through mid-January and Chrysler up to four billion on December 29, officials said.
An additional four billion dollars from the TARP will be available in February, contingent upon congressional approval of the second portion of that program.
Among the “targets” established by the loan would be a two-thirds reduction in debt by exchanging debt for equity, more flexible work rules and cuts in wages to make the companies competitive with foreign manufacturers established on US soil.
“The loan will be automatically called by the government and will be repaid in full if certain conditions are not met” by March 31, a senior administration official said.
“The most important one is that the firms must be viable.”
The official added that “this does not mean the firms has to be profitable” by March 31 but that “the firms have to be profitable soon.”
Wagoner said the terms of the deals were “in most cases consistent with the plan we reviewed with Congress.”
“I think what we need to do is show we can get that stuff done on the required time frame and then on the basis of that we will develop future projections for the company.”
While the terms of the agreement allows for GM to use the loans to fund an orderly bankruptcy, Wagoner said the company did not ask for the option and does not intend to exercise it.
“Our view has been all along that bankruptcy is a very high risk process, particularly for this industry and particularly at this time and it would have massive risks and negative ramifications,” Wagoner said, adding that he believes the loans will be “adequate” to support operations.
“Our intention is to proceed ahead benefitting from this funding… and make sure we put together a plan that doesn't require that.”
Wagoner vowed to work closely with government officials, its unions, bond holders and other stakeholders and to provide regular updates as to the automaker's progress.
“People should have a lot of confidence that not only General Motors but the US auto industry is on the right path and as we execute the plans we've laid out that the future for this industry could be extremely bright,” Wagoner said.
The plans set out by GM, Ford and Chrysler include major investments in developing more fuel efficient vehicles and developing alternatives including hybrids, biofuel and fuel-cell powered engines.
“This is a great opportunity to reestablish the very strong global position that the US has traditionally held in the auto business,” Wagoner said.
