President Barack Obama said on Thursday the administration would unveil its next steps to help the troubled U.S. auto industry in the coming days, provided the companies push ahead with a sweeping restructuring.
The signal of additional federal support prompted a rally in General Motors Corp shares and came as the embattled automaker announced that 12 percent of its U.S. hourly workers had taken buyout offers to leave the company.
Auto sector shares rallied across the board and shares of GM surged 16 percent as Obama's comments bolstered expectations that while U.S. officials would demand tough concessions from creditors and shareholders, they would not force GM and its smaller U.S. rival Chrysler LLC into bankruptcy.
What we're expecting is that the automakers are going to be working with us to restructure. We will provide them some help, Obama said at a town hall meeting conducted at the White House for viewers on the Internet.
I know that it is not popular to provide help ... to auto companies, he said. If they're not willing to make the changes and the restructurings that are necessary, then I'm not willing to have taxpayer money chase after bad money.
GM and Chrysler face a March 31 deadline for U.S. officials to act on a request for up to $22 billion in additional emergency loans to help them ride out the weakest auto sales in three decades.
On a combined basis, the two automakers have relied on $17.4 billion in loans from the U.S. Treasury to stay in operation since the start of the year.
The request for additional funding, which is being reviewed by a White House panel led by former investment banker Steve Rattner, hinges on their ability to win concessions from the United Auto Workers union and creditors.
As part of its sweeping restructuring efforts, GM said on Thursday that 7,500 U.S. hourly workers represented by the UAW had accepted buyout offers to leave its payroll by April 1.
Including the latest round of buyouts, GM has cut 60,500 jobs since 2006 -- more than half of its U.S. factory work force -- as U.S. auto sales have slowed and its own cash position has weakened.
Separately, Chrysler said it would extend a buyout program that it offered to all its 26,000 U.S. hourly workers last month.
GM and Chrysler have won pending contract changes from the UAW intended to help them cut hourly wage costs to the level of Japanese automakers operating plants in the United States.
But both automakers have yet to reach related deals with the UAW that would allow them to pay the union in stock rather than cash for half of their remaining obligations to a trust fund for retiree health care, Voluntary Employee Beneficiary Association.
GM bondholders also face pressure to write off two-thirds of the more than $27 billion they are owed in exchange for stock in a recapitalized company.
Advisers to GM bondholders met with Rattner and the autos task force earlier this month but complained as recently as Sunday that they had been shut out of ensuing talks with both U.S. government representatives and the GM executives.
A person briefed on those negotiations said on Thursday that the two sides had begun talking again this week.
GM shares were up 11 percent at $3.32 on the New York Stock Exchange on Thursday afternoon, off an earlier high at $3.49.
'NO SIGNS OF RECOVERY'
GM and Chrysler have been driven to the brink of failure by a deepening downturn in U.S. car sales, which slumped by more than a third in January and February and hit their lowest levels in 27 years.
Toyota Motor Corp President Katsuaki Watanabe said U.S. auto industry sales are showing no signs of recovery in March from a weak start to the year and he could not tell when global car sales would bottom.
Annualized sales in January and February were a little above 9 million, and we're hearing that March will be about the same, if not worse than February, Watanabe told a news conference on Thursday.
Honda Motor Co, Japan's No. 2 automaker, also said it saw no signs of a recovery in market demand as it announced further delays to the start of a new factory in Japan by at least a year.
In South Korea, the government announced tax breaks for new car buyers and measures for easier consumer financing to support its domestic car industry.
Most automakers have been reducing production, scaling back investment and cutting jobs in an effort to preserve cash as the sales slump bites around the globe.
(Additional reporting by Chang-ran Kim, Kevin Krolicki, Poornima Gupta and Walden Siew, editing by Matthew Lewis)