GM, Chrysler Seek Billions More in Aid

Those loan agreements will now be managed by the Obama administration, which is expected to take a different view of some of its terms.

Under the terms of the existing agreement, the companies were supposed to have presented signed agreements with the union that would cover reductions in wages and benefits, as well as alterations to the fund for retiree health care.

GM and Chrysler each announced yesterday that they have reached limited agreements with the United Auto Workers.

But significant labor issues remain.

Among other things, the companies and the union have not come to a final understanding on how the companies should meet their obligations -- more than $20 billion worth -- to provide retiree health care.

Despite their differences, all sides presented optimistic views of the labor negotiations.

"The changes will help these companies face the extraordinarily difficult economic climate in which they operate," UAW President Ronald A. Gettelfinger said in a statement.

The agreement "demonstrates the professionalism and maturity of both groups coming together," Nardelli added.

The federal loan agreement also required GM to have reached an agreement with company's bondholders, but the company has not yet settled with them.

Some of the Bush administration's mandates in the loan agreement have proved difficult, if not impossible, for the parties to meet.

For example, the loan agreement proposed that GM fund half of its upcoming $7 billion payment to the union-run health-care trust in company stock instead of cash. But the total value of GM shares is only $1.33 billion.

Economists continue to disagree over how long and how deep the recession will prove to be. But in recent months, a growing number have suggested that the downturn will continue through the year, running longer than some had once anticipated, and the automakers' announcements yesterday reflect the growing doubts.

When GM and Chrysler presented their plans to the government in December, each anticipated that U.S. auto sales would amount to 12 million in 2009.

At the time, that estimate reflected a drastic drop. But as the economy turned for the worse, the projections have fallen further.

In filing their plans yesterday, GM and Chrysler predicted that that U.S. auto sales would slump to about 10.5 million, a 13 percent drop. Chrysler offered the gloomiest prediction, suggesting that annual sales were unlikely to rise much until after 2012.

Under the plan GM submitted, the company will cut 47,000 jobs worldwide this year and over the next few years will reduce its plants to 33 from 47. The company said it will focus on "fewer, better" products.

But to get by the next few years, GM said it needs at least $9 billion more. If economic conditions and sales forecasts worsen, however, officials said the company would need an additional $16 billion.

With government help, GM predicted, it could return to profitability in 24 months. Without the loans, GM could run out of money by March, company officials said.

Both companies had been asked to consider the possibility of declaring bankruptcy and using the process to restructure their operations. Under such a scenario, the government would most likely foot the bill of the companies' debtor-in-possession financing, or short-term loans geared at carrying a company through bankruptcy proceedings.

But both companies said that option would be more expensive. And it could prove more disruptive, as customers shun the companies. Suppliers, too, would probably be hurt, adding to the nation's job losses at a time of soaring unemployment.

Ford has not yet pursued government aid, but the company has also been talking separately with the union about concessions. Although the automaker insists that it has enough money to survive the economic slump, it said it does not want to become disadvantaged by not negotiating along with its cross-town rivals.

Staff writer Brady Dennis contributed to this report.