Feds may seek more concessions in exchange for automaker loans

DETROIT -- The Obama administration is likely to demand deeper concessions from Chrysler LLC and General Motors Corp. in exchange for additional federal loans, a person briefed on the government's plan said Friday.

The concessions could go beyond the requirements imposed by the Bush administration when it agreed to loan the automakers money , said the person, who asked not to be identified because the government's plans have not been revealed.

President Obama will announce the administration's plan for the auto industry Monday.

Both automakers are operating on a total of $17.4 billion in government loans, trying to weather the worst auto sales downturn in 27 years. In addition, GM is seeking another $16.6 billion, while Chrysler wants $5 billion more.

General Motors chief executive Rick Wagoner met with members of the task force Friday, an Obama administration official said.

The term sheets that came with the first loans require extensive restructuring, including executive pay cuts and labor costs that match Japanese automakers. Both companies also must persuade the United Auto Workers to take equity in exchange for half of the payments the companies must make to union-run trust funds that will take over retiree health-care costs starting next year. And they must get debtholders to swap equity for two-thirds of the companies' debt.

"There may be more extensive conditions than were laid out initially in the term sheets," the person said.

Both companies face a Tuesday deadline to turn in finished restructuring plans to the government, but neither company is likely to have everything done. Neither GM nor Chrysler have deals with the union on the trust funding or concessions from their debtholders, although talks are continuing.

"Our union is continuing to work with the task force and the auto companies to find a solution to the may issues we face," UAW president Ron Gettelfinger said Friday through a spokeswoman.

The companies are likely to get short-term loans and an extension of time to reach agreements with debtholders and the union. The loans are likely to come with tight deadlines.

Obama made clear Thursday that the companies would face having to make tough concessions for additional aid, but it was unclear if that meant concessions beyond the initial loan terms.

The president said if the companies were "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."

Republicans were signaling their opposition to Obama's approach.

"Everyone wants America's automakers to not only survive, but thrive. That's why it's difficult to understand the logic of adding more burdens and requirements to the very companies that are struggling to stay afloat," said Antonia Ferrier, a spokeswoman for House Republican Leader John Boehner, R-Ohio.

Obama said the current business model for the U.S. auto industry was unsustainable and various industry stakeholders -- suppliers, unions, creditors, dealers -- would need to make concessions.

A task force created by Obama has been meeting with industry officials and reviewing restructuring plans submitted by the companies to revitalize the industry through shared sacrifices.

The government can recall its loans to GM and Chrysler if they fail to sign deals for debt restructuring and other concessions from stakeholders, including the UAW, by Tuesday. But the administration has not indicated it plans to do so.

GM owes roughly $28 billion to bondholders, while Chrysler owes about $7 billion in first- and second-term debt, mainly to banks. GM owes roughly $20 billion to its retiree health care trust, while Chrysler owes $10.6 billion.

Bondholders have been reluctant to go along with the cuts, saying they're being required to sacrifice more than other parties, but they have been holding discussions about the changes.

The union has agreed to other terms of the loans, including work rule changes and reducing total hourly labor costs at U.S factories to a level comparable with Japanese automakers.

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Associated Press Writer Ken Thomas reported from Washington, D.C.