The Obama administration will extend $500 million to Chrysler LLC and up to $5 billion to General Motors Corp to restructure their operations, an independent oversight report on the Treasury Department's corporate rescue fund said on Tuesday.
As a tentative measure, the administration has set aside up to $500 million to help Chrysler get through April, till its deal with Fiat is finalised, the report said.
It has offered up to $6 billion to help finance the alliance that would give Chrysler access to Fiat's small car technology. In return Fiat is seeking access to a platform for building its specialised vehicles and Chrysler's US-wide marketing network.
Meanwhile, GM sent an email to all employees on Monday announcing it will cut about 1,600 salaried workers this week as part of a previously announced plan. (See: GM to shed 1,600 salaried workers in next 10 days)
On 30 March, President Barack Obama had asked the company to make additional cuts to become viable and receive additional government loans. He had given until 30 April to comply with the government proposal.
GM also aims to cut 37,000 hourly jobs worldwide by the end of the year.
"This will be a very trying time for the entire GM team, especially for the employees impacted by this action," said the email from Troy Clarke, president of GM North America.
US salaried employees who keep their jobs will receive pay cuts effective 1 May and running through the end of this year. The pay of executive employees will be trimmed by 10 per cent, and many other salaried employees will see reductions of 3 per cent to 7 per cent.
Chrysler talks nearing end
Meanwhile, a Canadian news agency reported that the Canadian Auto Workers (CAW) officials expressed confidence on Tuesday that a deal with Chrysler Canada would be reached before the 30 April deadline.
The agency quoted Rick Laporte, a member of the union's master bargaining committee, as saying, "The dialogue has been going very well."
"We've been engaging each other and the discussion is moving fairly well. We're under pressure to get an agreement over the next 24 hours," Laporte told the agancy..
The two sides resumed their stalled negotiations Monday. (See: Fiat keen on Chrysler deal, but sees union resistance).
A new agreement with the CAW is essential for more aid from the Canadian government. However, this aid is dependent on Chrysler submitting to an alliance with Fiat as a precondition for continued assistance under the bailout plan. Chrysler has until the end of this month to comply.
The United Auto Workers (UAW) has urged its members to lobby the White House to ensure that workers and retirees are treated fairly in negotiations at GM and Chrysler on new concessions, which are vital for their survival. (See: UAW to lobby White House in GM, Chrysler negotiations).
"We need President Obama and his auto task force to stand up for the interests of workers and retirees in these restructuring negotiations," the union said in an appeal on its Web site to members.
The UAW represents about 26,000 workers at Chrysler and 62,000 at GM.
GM has received $13.4 billion since December as government aid, while Chrysler received about $4 billion. Ford Motor Co is also struggling but opted against seeking rescue funds.