By JOHN D. STOLL and SHARON TERLEP
General Motors Corp. appears to be off to a slow start to meet the mandates of a federal bailout, and its top executive said Monday the company hasn't ruled out a bankruptcy filing.
Speaking at the North American International Auto Show in Detroit, Rick Wagoner, GM's chairman and chief executive, said the company wants to avoid a Chapter 11 filing, but also said its viability is "not 100%" certain at this point.
Among GM's requirements under the federal loan package are cutting labor costs by renegotiating its contract with the United Auto Workers union.
Although the UAW has said it is ready to negotiate, UAW President Ron Gettelfinger said Monday it is unclear what kind of reductions it will have to agree to. The Treasury Department has said GM must have a plan by March to become "viable" and have "positive net value."
"We are still trying to figure out what that means," Mr. Gettelfinger said in an interview. He added the union has heard little from the Treasury on what is expected. "We have no documents, no contact with the federal government," he said.
A Treasury spokesperson could not immediately be reached for comment.
GM last month won $9.4 billion in federal loans. The company is in line to get an additional $4 billion if, by Feb. 17, it negotiates a cost-cutting deal with the union and reaches agreement with bondholders to lower its debt, according to terms disclosed by the Treasury. The funds are intended to get the company through the first quarter.
Speaking to reporters at the Detroit auto show, Mr. Wagoner said he met last week with advisers on the restructuring and walked away convinced "there are options that can work in each of these areas." He said he is optimistic about cost-cutting talks with the union.
But, Mr. Wagoner said, GM could be forced to ask for additional loans after March 31. He said he hopes he doesn't have to return to Washington on a regular basis to ask for more money.
The transition from the Bush administration to the government of President-elect Barack Obama, as well as the new Congress with increased Democratic control, are other complicating factors. A Democratic bill circulated last week included provisions that could alter the terms of the loan and ease the requirements on the union to lower labor costs.
"I think it is stickier and more complicated than people thought," said Kimberly Rodriguez, a principal at Grant Thorton LLP, speaking of the bailout. Ms. Rodriguez, who advises on auto industry restructurings and bankruptcies, added the government may have left the terms "sufficiently vague in order to hold GM's feet to the fire."
Douglas Bernstein, a bankruptcy lawyer with Plunkett Cooney in Bloomfield Hills, Mich., said the White House could be acting like many lenders and be putting an unrealistically tight timetable on GM's restructuring to keep pressure on the company.
The Treasury has told GM and Chrysler LLC, which also received a $4 billion federal loan, to negotiate with bondholders to significantly reduce their debt. But GM Chief Operating Officer Frederick "Fritz" Henderson suggested Monday that it could be some time before substantive discussions can be held.
GM needs to have key aspects of its restructuring nailed down -- including the union givebacks -- to present an accurate value of the company to bond and equity holders, Mr. Henderson said. Without that, it's difficult to negotiate with debt holders over a debt reduction plan, he said.
Another key aspect of GM's restructuring involves the disposal of some of its eight automotive brands. Its Saab and Hummer nameplates are for sale, and the future of the Saturn division is unclear, but any moves are likely to take months to complete.
At the car show, GM's top European executive, Carl Peter Forster, said the company must adequately fund Saab before it can sell the money-losing business. The stabilization could take eight weeks, he said.
The complications are slowing another key part of GM's revamping plan: billions of dollars in loans offered by the government of Canada and province of Ontario. Mr. Henderson said GM hasn't decided whether to accept the loans because the company is trying get a better understanding of the conditions attached to the loans.
Also Monday, GM selected a Korean company to provide lithium-ion batteries for its Chevrolet Volt electric car and said it will set up a plant in Michigan to eventually package the batteries into the large assemblies needed to power the vehicle.
GM said the plant will be located in Michigan, giving a boost to its beleaguered home state. It chose LG Chem Ltd. to supply the batteries, passing over an American company that was in the running, A123 Systems Inc., of Watertown, Mass.
LG Chem will initially produce both the battery cells and assemble them into battery packs for GM. GM plans to begin producing battery packs, which include hundreds of cells, at the Michigan plant starting in 2010. The auto maker did not specify where in Michigan the plant will be located.
"The design, development and production of advanced batteries must be a core competency for GM," said Mr. Wagoner at the Detroit show, where the Volt concept was first rolled out two years ago. GM also plans to produce small engines for the Volt in Michigan. The vehicle is powered by a gasoline engine after the batteries run out of power.
Michigan Gov. Jennifer Granholm said in an interview the state is looking to offer big incentives to car-battery companies and other suppliers to that industry to locate in her state. Ms. Granholm said that as much as $2 billion in aid to the battery industry could be included in a stimulus package from the Obama administration.
Mr. Wagoner said GM has committed more than $1 billion to the Volt. He sought to tamp down uncertainty over the product's future that emerged in mid-December after GM delayed construction of a Flint, Mich., factory slated to build the car's engine.
The Volt, which GM promised to begin selling by 2010, is a high-stakes effort to deliver a breakthrough technology that will compete with rival Toyota Motor Corp.'s iconic Prius hybrid-electric vehicle.
The world's top auto makers touted battery-powered cars at the show, with Ford Motor Co., Chrysler and Toyota each rolling out offerings, but GM has made the biggest splash with the technology in recent years.
During an interview, Mr. Wagoner said the company remains focused on the 2010 launch of the Volt, and is open to using the car's battery technology in other GM brands shortly thereafter, including Cadillac.
Batteries have been one of the biggest hurdles for U.S.-based electric and hybrid vehicle manufacturers. Lithium-ion car batteries are made in volume in Japan, Korea and China, and auto makers have been concerned that if battery supplies tighten, Asian car makers will dominate access to the technology.
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