As General Motors set out proposals to slash jobs, close plants and scrap the famous Pontiac brand, new agreements fell into place between Chrysler and its unions in the United States and Canada.
The news last night made it apparent that the future of both companies now rests with their creditors.
GM, once the colossus of American capitalism, will become a leaner, government-owned company if the Obama administration goes along with the carmaker’s plans.
General Motors CEO Fritz Henderson said the company would offer the Treasury Department more than 50% of its stock to absolve GM of $10bn (€7.7bn) in government loans.
The carmaker also proposed that the United Auto Workers take GM stock for at least half the $20bn (€15.4bn) the company owes to a union-run trust that will assume retiree health care expenses starting next year.
Combined, the union and government would own 89% of the century-old carmaker, which has been bleeding red ink and is saddled with more than $62bn (€47.67bn) in debt.
“It is unprecedented, but it signifies the importance of the automobile industry,” said David Lewis, a retired professor at the University of Michigan who taught business history for 43 years.
Although the government has loaned money to corporations in the past, including to Chrysler in the 1970s, Mr Lewis could not recall a time when it had taken a majority stake in a company.
White House press secretary Robert Gibbs said the administration does not want to own GM or any other auto company.
“This administration has no desire to run an auto company on a day-to-day basis,” Mr Gibbs said. “We strongly back an auto industry we believe can, and should, be self-reliant of government funding.”
GM said it would speed up six factory closings announced in February and close three additional facilities in 2010. It will identify the plants in May and said they will include assembly, engine, transmission and parts-stamping factories.
GM will also cut 21,000 hourly jobs in the US by 2010 – 7,000 more than what the company outlined just two months ago.
With the factory cuts, GM will be a mere fraction of its old self. At the end of 1991, the company had 304,000 hourly workers in the US; by the end of 2010, it would have 40,000.
Also, General Motors Canada said it plans to slash its hourly work force from 10,300 to 4,400 by 2014.
In addition, GM plans to cut additional US salaried jobs beyond the 3,400 cuts completed last week, and it plans to reduce dealerships 42% by 2010.
GM also said it will end its Pontiac brand no later than next year, killing a brand known for cars such as the Trans Am and the GTO.
David Westcott, a Burlington, North Carolina, Pontiac dealer who also holds Buick, GMC and Suzuki franchises, was saddened, but not surprised.
“The bad thing is they make some great, great products,” said Mr Westcott, who has been selling Pontiacs for more than a decade. “But over the last few years, the volume has been decreasing.”