The big day is coming up for the auto industry. The bailout will affect the Big 3 and their 1,000 parts manufacturers.
General Motors Corp on Tuesday submitted the accelerated restructuring plan demanded by Congress, saying it needed up to $18 billion in loans and credit lines from the government. Their position is that GM needs to receive $4 billion of that U.S. government financing this month to survive. GM said that they would offer the government equity warrants in exchange for the financing. 
GM said that it hopes to increased production of fuel-efficient vehicles and energy-saving technologies. GM also plans rationalization of brands, models and retail outlets. It also plans to reduce wage and benefit costs, including further reductions in executive compensation. It plans for further and significant capital restructuring. Finally it wants to further consolidation in manufacturing operations.
GM is weighed down by heavy "legacy costs" in the pensions and health care of its retirees, while other companies have no pension plan, and its health care costs per vehicle are barely a tenth of GM's. GM's $1.1 billion loss in the first quarter doesn't begin to tell the whole story. The carmaker is saddled with a $1,600-per-vehicle handicap in so-called legacy costs, mostly retiree health and pension benefits. 
All UAW leaders and the Big 3 automakers need to show up this week together. The leaders in Congress need to know what the UAW is willing to do to help also. According to GM's annual report, it paid $73.26 per hour in wages and benefits to its hourly workers last year. GM will seek to reduce costs to about $48 per hour, which is about the average hourly cost incurred by Toyota, Honda and Nissan Motor Co., company officials have said. 
General Motors offered buyouts to all of its 74,000 US hourly employees as the automotive giant continues to downsize operations in response to declining US market share and massive financial losses.  The head of the United Automobile Workers Union said it expected 15,000 to 20,000 workers to leave General Motors during a new round of buyouts, and that G.M. would replace nearly all of them with lower-paid employees. Including benefits and retiree health care costs, each worker who leaves under the buyout program and is replaced by someone on the lower pay scale would save G.M. about $48 an hour, or nearly $100,000 a year.
Germany has shown their faith in GM and its management since it is ready to guarantee funds for ailing carmaker Opel but any money it provides to the General Motors' unit must stay in Germany, Chancellor Angela Merkel said. 
So how will the bridge loan at GM be used? Cash will support ongoing operations as we continue to restructure the business. It plans $8.0 billion in payments to parts suppliers and another $1.2 billion for other vendors. It also plans another $900 million in wages and another $500 million in healthcare and legacy costs. Last but not least GM plans another $500 million in capital expenditures.
Local United Auto Workers leaders from across the U.S. will hold an emergency meeting in Detroit on Wednesday to discuss concessions the union could make to help auto companies get government loans.
Chrysler LLC, its monthly sales were off more than GM's, says it will need "immediate liquidity support" of $7 billion to reassure customers, encourage dealers and make it into next year. Cerberus / Chrysler LLC says that it will work with government to provide collateral and secure taxpayer funding. Cerberus / Chrysler LLC expect to be in a position to begin repaying government loans in 2012. So how will the bridge loan at Chrysler be used? Cash will support ongoing operations as they continue to restructure the business, including in the first quarter alone. It plans $8.0 billion in payments to parts suppliers and another $1.2 billion for other vendors. It also plans another $900 million in wages and another $500 million in healthcare and legacy costs. Last but not least Chrysler plans another $500 million in capital expenditures. 
Ford Motor Co., says it's OK for now. Although it is seeking up to $9 billion in bridge financing, but says it hopes to complete turnaround without accessing the loan should Congress agree to make the funds available. But it wants the ability to access up to $9 billion in government credit. They also said that if GM fails it could take the entire domestic auto industry down with it. 
All UAW leaders and the Big 3 automakers need to show up with this week too. The leaders in Congress need to know what the UAW is willing to do to help also. According to GM's annual report, it paid $73.26 per hour in wages and benefits to its hourly workers last year.
Do you think that U.S. automakers should be allowed to fail? I do.
I think they should file for Chapter 11 bankruptcy protection under the U.S. courts and reorganize. The reason is that the decline in competitiveness of General Motors, Ford and Chrysler is a long-term problem, going back to the 1970s and 1980s, beginning with lagging physical productivity in assembling automobiles compared to the leading Japanese companies, and then in quality and also in engineering productivity for product development. "The Machine that Changed the World", which documents the state of the world auto industry circa 1990 and the mounting problems of the U.S. automakers. But things have gone from bad to worse.
The only question is shall they stay or shall they go now?