DETROIT - General Motors Corp and Chrysler LLC requested nearly $22 billion in combined additional U.S. government aid and have reached a tentative deal with the United Auto Workers union to reduce labor costs.
The two automakers, which have so far received $17.4 billion from the U.S. Treasury, also announced sweeping restructuring that included capacity reduction and job cuts.
GM is seeking a total of up to $30 billion in U.S. government aid, more than double its original request -- and said it would run out of cash as soon as March without new federal funding.
I think this is a perilous road, said Alan Lancz, president at Alan B Lancz & Associates Inc. This is a situation where we really have to decide whether we are throwing good money after bad.
They have to turn the operations around, otherwise they are going to be back asking for more aid.
The request was released soon after No. 3 U.S. automaker Chrysler sought an additional $5 billion from the current $4 billion in U.S. government aid, saying it expected the brutal downturn in the U.S. market to run another three years.
Both companies have reached a key deal with the UAW that is expected to bring labor costs in line with Japanese automakers operating in the United States
The two Detroit automakers faced a deadline on Tuesday to submit restructuring plans to the U.S. Treasury to cut their debt and labor costs.
The companies now have until March 31 to prove to the government they can be commercially viable.
Chrysler, the No. 3 U.S. automaker, has already taken $4 billion in U.S. government loans and it previously asked for an additional $3 billion, for a total of $7 billion. But Tuesday's request boosted the prospective total to $9 billion.
GM shares fell more than 14 percent on Tuesday and analysts said the recent showdown between GM, its bondholders and the United Auto Workers union underscored the heightened risk of bankruptcy for the top U.S. automaker.
The White House did not rule out a government-managed bankruptcy for the automakers, but said a strong and viable U.S. automobile industry was very important for the country.
I wouldn't preclude policy choices, particularly since we haven't seen details on what they think is ultimately going to be most helpful for them, White House spokesman Robert Gibbs told reporters when pressed on whether the administration would close the door on a government-backed bankruptcy.
Tuesday was the deadline for both GM and Chrysler, majority-owned by Cerberus Capital, to submit their restructuring plans under the terms of the bailout that has kept both automakers in business this year.
Without a framework deal on how to cut GM's crippling debt, analysts have said the government would confront a political and economic dilemma in the coming days.
Bankruptcy for GM could cost tens of thousands of jobs and topple suppliers and dealers just as the White House is focused on trying to pull the economy from the brink of a deeper recession.
In response to signs of a prolonged slump in demand for new cars and trucks, GM said it would step up cost-cutting, reducing its global workforce by 47,000 jobs this year and cutting five additional U.S. plants by 2012.
Chrysler, meanwhile, will reduce capacity by 100,000 units and cut 3,000 jobs.
The two automakers were locked in talks with the UAW on labor concessions over the weekend and they still have yet to reach a final deal on the VEBA, or Voluntary Employees Beneficiary Association trust.
GM also said it had not reached deals with bondholders.
Critics of the bailout of GM and smaller rival Chrysler have urged the government to consider financing a court- supervised restructuring for the two ailing automakers in bankruptcy.
GM said its own analysis of the costs and risks of a bankruptcy filing would require more than $100 billion in financing that could have to be provided by the U.S. government.
Earlier, Chrysler's former owner, Germany's Daimler, posted a fourth-quarter loss as it wrote down the value of a $1.5 billion loan to the struggling U.S. automaker. Daimler previously wrote off the full value of its 19.9 percent stake in Chrysler.
GM's Opel and Saab brands braced for news of the survival plan, which is expected to incorporate wide-ranging changes to the automaker's European operations.
Options on the table for Opel and GM's Swedish unit Saab include securing loan guarantees from Berlin and Stockholm and spinning off the two businesses as independent entities -- a scenario favored by GM Europe's labor leaders.
Efforts by GM to unload assets to raise cash have gone slowly since the automaker announced plans to raise between $2 billion and $3 billion from such steps last summer.
China's Sichuan Auto Industry Group Co denied on Tuesday a report that it was interested in buying Hummer.
(Additional reporting by Soyouing Kim, David Bailey, Walden Siew, Nick Carey, Victoria Klesty, Angelika Gruber, Love Liman, Gilles Castonguay; Editing by Patrick Fitzgibbons, Matthew Lewis, John Wallace and Andre Grenon)