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Both GM and Chrysler say they need billions more in federal loans to survive. GM says it needs to borrow an additional $16.6 billion. It has already received $13.4 billion, making its total request to $30 billion. Chrysler on Tuesday asked for an additional $5 billion. It already took a $4 billion loan.
To reduce costs, both companies will accelerate layoffs. GM will slash 47,000 jobs and Chrysler will cut 3,000. That will trigger more plant closures.
After tense negotiations, the United Auto Workers Union will ask its members to accept reduced pay and severance and modified work rules.
"We have continued to see an unprecedented decline in the automotive sector. The lack of available credit affects consumers and our dealers," said Bob Nardelli, the Chrysler chairman and CEO.
There is also bad news for auto dealers. Both auto makers will reduce brands and models.
"We have a lot of work is ahead of us, but we are confident that this plan will lead to a sustainable and profitable General Motors. Supporting GM's viability we believe is a sound investment for U.S. taxpayers and that will be repaid," said Rick Waggoner, the GM chairman and CEO.
Local auto dealerships have also been hard hit but there's no provision to help them. John Moore owns the Buick Pontiac GMC Dealership in Los Gatos. He's expecting more casualties among his competitors.
"I think those that spend too much money a month in rent and those that don't own their property, those that have invested heavily in facilities in the last couple of years, are especially going to be hard hit," said Moore.
The failure of other dealerships has created more business for his service department. He hired technicians and a service advisor to meet demand.
GM says it expects its network of 6,200 dealers will drop by 2,000 in five years.
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