Detroit Three: Making the Sales Pitch of a Lifetime

The Detroit Three are putting the finishing touches and obtaining the blessings of their boards and upper management for the biggest sales pitch of their lives this week. They are preparing the viability plans due to Congress on Tuesday in order to obtain the $25 billion in bridge loans they are seeking.

Executives from General Motors, Ford and Chrysler worked through the Thanksgiving holiday putting together plans after Congressmen criticized them for lacking such plans in the last round of hearings. While each company's plan is individual to their unique circumstances, all are expected to detail even deeper cuts, including executive compensation and perks, than have already been made and an acceleration of environmental and fuel-saving initiatives. Their plans also are expected to include even more concessions from the United Auto Workers (UAW) union.

Meantime, the Detroit Three's plea for help is likely to get a boost from the continued deterioration of auto sales in the U.S., where automakers report November results Tuesday. Sales are expected to hit 25-year lows. That sales slide is spreading globally with a number of markets reporting dismal sales on Monday.

Schedule of Events

After their dismal performance in Congressional hearings last month, the Detroit Three were criticized for not having a plan to show how the $25 billion in bridge loans would be used, how the loans would keep them financial viable and how the loans would be repaid.

The lack of plans prompted Democratic leaders from the House and Senate to send them a letter requiring them to submit "a credible restructuring plan" by Tuesday, December 2. The companies are likely to send two plans to Congress -- one a short public summary and another longer report intended to be confidential. GM has said it will deliver its plan after Tuesday's stock market close.

Then it is back to the hot seat for the CEOs of the Detroit Three. The senate Banking Committee has set a hearing for Thursday morning; the House Financial Services Committee has scheduled one for Friday morning. If they find the Detroit Three plans satisfactory, Congress will reconvene for a vote next week.

UAW: Signaling More Concessions

UAW President Ron Gettelfinger told CNN on Sunday that the union is willing to consider more concessions than were already made in the last contract, which was hailed by experts as a landmark concessionary agreement.

"We're prepared to go back to the table," he told CNN." But he noted the union expects others to make sacrifices, too, hinting that executive compensation should be capped. "They need to establish that executive compensation is something that they're willing to curtail.... They can also give the government an equity stake in the business," he said in the interview.

It further appears the union is ready to give up the controversial Jobs Bank, a program that gives nearly full pay to idled workers. The number of laid-off workers in the Jobs Bank has been dwindling in recent years but still is seen by some outsiders as a reason the Detroit Three are uncompetitive.

GM: Deeper Cuts, Possible Brand Eliminations

General Motors' board of directors had a series of conference calls over the holiday week and a meeting on Sunday to review the plan.

The plan is likely to include executive pay cuts, more salaried job cuts and a request from GM to some bondholders to convert to equity and some cash payout to redeem the debt they hold. At the same time, GM's plan will push the Chevrolet Volt as its way to achieve dramatic fuel savings.

Also, reportedly on the table, were the possible elimination of more GM brands. Bloomberg reported that Saab, Pontiac, Saturn and/or others of GM's eight brands could be axed. Meantime, GM has asked the Swedish government for help with Saab; Ford has done the same with its Volvo division.

A point of contention appears to be brewing between GM CEO Rick Wagoner and some board members. Some GM directors insist all options should be on the table, including a Chapter 11 bankruptcy filing or a prepackaged bankruptcylike restructuring. However, Wagoner and other board members disagree, saying, as Wagoner has repeatedly in public, that an auto company in any kind of bankruptcy would be unable to sell cars to wary consumers.

Ford: Focus on Fuel Economy

Ford's plan is likely to focus on its already-existing plan to convert its fleet from larger SUVs and trucks to mostly fuel-saving models.

The subject of executive compensation has been taken up at Ford. But what may not wind up in the plan presented to Congress are cuts in CEO Alan Mulally's pay. Ford's board reportedly wants the compensation package of Mulally, who left Boeing to take over at Ford just over two years ago, to remain status quo.

In a rare interview, Ford Chairman Bill Ford Jr. told NPR radio last week Mulally and the board's compensation committee were discussion compensation. But he noted that he himself had not taken any compensation for the past four years. The Ford family, however, controls 40 percent of the voting power of Ford via just under 3 percent of a separate class of shares. What's not clear is if that arrangement would stay intact if the government took an equity position in Ford.

Ford's Mulally testified to Congress that the automaker had enough money to make it through 2009 but wanted, in essence, a line of credit in case the economy and auto sales soured more than the automaker predicted. Indeed, Ford appears to be in a stronger financial position than GM and Chrysler, if only by a narrow margin.

An analyst for Barclays Capital said Ford "is likely to fall below minimum cash levels" in the second half of next year.

Chrysler: Looking for a Partner While Squabbling With Daimler

Chrysler says it is fine-tuning its plan. The now privately owned Chrysler says it still needs an alliance with another automaker. The automaker reportedly tried to restart merger talks with GM after the last round of Congressional hearings.

Meantime, Chrysler is squabbling with its current partner, Daimler AG.

Last week, Daimler accused Cerberus of demanding that Daimler pay Cerberus as much as $9 billion to take Daimler's 19.9 percent stake in Chrysler. That's more than the $7.2 billion Cerberus paid Daimler last year for 80.1 percent of the company.

Daimler and Cerberus have been negotiating since September over Cerberus taking over Daimler's equity stake in Chrysler.

Meantime, Daimler took a $452-million charge for its Chrysler stake on its third-quarter earnings report and assigned the stake a book value of zero. Daimler apparently is unwilling to pay Cerberus to take the stake off its hands.

In response, Cerberus implied it was duped by Daimler about exactly what it was getting with the purchase of Chrysler. Cerberus accused Daimler of "deliberate conduct that resulted in the impairment of Chrysler's business." The private equity firm charged that the German automaker "intentionally and materially breached its obligations" under the contracts related to last year's deal and of "misrepresentations" relating to Chrysler's vehicle financing and leasing arrangements in the lead-up to the sale.

Cerberus, saying it was exploring "strategic options," hinted it was considering filing a lawsuit against Daimler.