Citing Cost Cuts, GM Won't Seek Extra Aid This Month

General Motors has dropped its request for an additional $2 billion in government assistance to cover its operations in March, the company announced yesterday, citing the success of its ongoing cost-cutting programs.

The suspension of the loan request gives the automaker and the Obama administration's auto industry task force more time to decide how the government might continue to aid the company.

Last month, GM, while reporting that it had $9 billion in cash on hand, had warned it would soon need an additional $2 billion from the government to continue to operate.

But while GM has dropped the immediate request, it has not withdrawn or lowered its overall request for as much as $30 billion in government help.

"This development reflects the acceleration of GM's company-wide cost reduction efforts as well as pro-active deferrals of spending previously anticipated in January and February," Ray G. Young, GM executive vice president and chief financial officer, said in a statement.

Under pressure from administration officials, Congress and their competitors, the Detroit Three automakers have raced to reduce their costs.

In recent weeks, they have negotiated new wage and benefit concessions from the United Auto Workers, and yesterday GM announced that it had reached an agreement with Canadian workers to cut labor and health-care costs. The automakers have also made production cuts and are planning to eliminate some brands. But most of the financial benefits of those moves are not expected to kick in until later.

"It may just be that they had better cash flow this month," Aaron Bragman, an analyst at IHS Global Insight, said of the deferred loan request. "But they haven't reduced the amount that they need."

Indeed, if projected auto sales continue to slide, Bragman said, GM may have to increase its request for federal aid. The Global Insight forecast for U.S. annual auto sales by all manufacturers was 10.3 million two weeks go but recently dropped to 9.5 million.

"GM will remain in regular contact with the Presidential Task Force on the Auto Industry on the status of GM's restructuring actions, its liquidity position, timing of future funding requests, and other relevant topics of mutual concern," the company said in a statement.

Rep. John D. Dingell (D-Mich.) said the suspension of the request shows that GM, criticized by some in Congress for failing to adapt, is moving in the right direction.

"This indicates that GM's viability plan is showing results, and the company is on the right path toward future profitability," Dingell said. "In light of this positive news in otherwise bleak economic times, we must continue to do all that is possible in order to ensure the continued viability of the domestic automotive industry."

"It's a little piece of good news," Efrain Levy, automotive equities analyst for Standard & Poor's, said of GM's deferred loan request. "This also has the political benefit that they're not asking for more money every time they open their mouth."