Detroit: Wait until after next year

Detroit: Wait until after next year

Congress wants the Big Three to produce a plan for profitability before it will approve a bailout. This could be within reach…but not until 2010.

By Chris Isidore, senior writer

NEW YORK ( — A profitable U.S. auto industry just around the corner? Given the crisis hitting the industry, it sounds about as realistic as flying cars.

Congressional leaders are demanding to see details by Dec. 2 about how U.S. automakers will start making money again before they’ll agree to even have a vote on the $25 billion federal loan package the industry is seeking.

Many critics of the bailout suggest that automakers have shown no indication of how they’ll return to profitability. Some argue the Big Three U.S. automakers are doomed to fail even if they get loans from the government.

But General Motors, Ford Motor and Chrysler have already made sizable cuts in production and staffing throughout the year. Additional cuts will come in the next few months, and some as soon as later this week.

While it’s tough to offer guarantees of profitability with so much uncertainty about the economy, if the automakers get the federal help they are asking for, the Big Three could be back in the black as soon as 2010.

With that in mind, here’s what GM, Ford and Chrysler are likely to point out in their business plan to Congress.
Lower employment costs

GM (GM, Fortune 500), Ford (F, Fortune 500) and Chrysler have been downsizing for years and have all continued to make even deeper cuts this year which will save them billions of dollars.

GM plans to cut more than 7,000 salaried and contract employees this year as it aims to trim nonunion labor costs by 30%, or about $2 billion annually.

Those departures did not begin until this quarter and most of the remaining employees should leave by the end of the year. So some of the savings won’t take effect until next year. And the cost of the severance and retirement packages is causing steeper losses in this year.

Ford and Chrysler plan similar size cuts in their non-union staff. Chrysler plans to identify by Wednesday 5,000 salaried and contract staff who will leave the company, about 25% of that remaining workforce.more


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