Struggling US automakers General Motors Corp. and Chrysler LLC are set to skip this year’s Tokyo Motor Show as the global slowdown takes a heavy toll on the industry, reports said Wednesday.

Chrysler and GM decided to cut costs instead of taking part in the biennial motor show in Japan, one of the auto world’s premier get-togethers, the Mainichi Shimbun newspaper reported, quoting unnamed sources.

The two companies are relying on billions of dollars in US federal loans to stay afloat. Ford Motor Co., the other member of Detroit’s Big Three, has warned that it could also need government help if sales worsen.

GM and Chrysler failed to register for October’s event by a deadline of the end of December, Kyodo News said, citing an official of the motor show sponsor Japan Automobile Manufacturers Association (JAMA).

JAMA spokeswoman Kazusa Yoshino declined to comment on the report but said: “The deadline isn’t strict and we will still accept registrations.”

She said the details of the show such as the exhibitors would be announced in March or April.

Japanese automakers are also suffering as the global economic crisis saps demand for new cars, particularly in the United States.

Japanese automakers Nissan Motor Co. and Suzuki Motor Corp. are skipping the ongoing Detroit Motor Show. However, Japan’s top two automakers, Toyota Motor Corp. and Honda Motor Co., are both taking part.

source : AFP

General Motors Corp. received the first $4 billion of a $13.4-billion lifeline from the Bush administration on Wednesday, while Chrysler LLC continued to craft final details with U.S. Treasury officials.

The Treasury also released guidelines for how it would help other parts of the auto industry, suggesting that suppliers could be next in line for aid but making no commitments and warning that companies would need to show how their failure would hurt the economy nationwide.

GM Chief Financial Officer Ray Young signed the loan agreement around 4:30 p.m., capping three months of intense lobbying and public miscues by the nation’s largest automaker to craft a survival plan in a global economic downturn.

“We appreciate the administration extending a financial bridge to GM at this critical time for the U.S. auto industry,” GM spokesman Greg Martin said.

Without the first loan, and an additional $9.4 billion, which GM can draw in the coming months, the company would have run short of cash in a matter of days, threatening bankruptcy for itself and many of its suppliers and dealers.

Chrysler’s $4-billion loan is seen by several analysts as too small to stave off collapse; the company had sought $7 billion.

With the money in hand, GM now faces weeks of intense talks with bondholders and the UAW to meet the terms the Bush administration demanded as part of the $17.4-billion rescue of GM and Chrysler.

Treasury officials have said they would get the money to the automakers before they needed it, but with the close of the fiscal year, it’s not clear how much longer Chrysler can go without its $4-billion payment.

“We’re working expeditiously with Chrysler to finalize that transaction, and we remain committed to closing it on a time line that will meet near-term funding needs,” Treasury spokeswoman Brookly McLaughlin said.

“Chrysler LLC is continuing its discussions with the Treasury Department and is working tirelessly to complete the loan requirements,” the company said in a statement.

Before the deal was signed, the Treasury set out guidelines for what it called the Automotive Industry Financing Program, which will offer aid to companies similar to the $6 billion injected into GMAC on Monday under the $700-billion financial industry bailout.

The guidelines allow Treasury officials to move case by case, saying officials will weigh how important a company is to the auto industry, whether its failure would hurt U.S. employment and “cause major disruptions to credit markets and significantly increase uncertainty or losses of confidence” in the U.S. economy.

While the terms appear focused on financial firms, they also are broad enough to encompass other automakers and suppliers, which have asked for federal aid but have been passed over so far.

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The clock is ticking for General Motors Corp. and Chrysler LLC. The automakers have 102 days to slash debt, renegotiate labor contracts and lay plans to cut thousands of jobs or face a government-mandated bankruptcy.

The Bush administration threw them a $13.4 billion lifeline from the U.S. bank-bailout program, with $4 billion more for GM in February provided Congress expands that fund. In exchange, the government gets warrants that will allow it to profit if the rescue succeeds and seniority over much of the companies’ debt if the effort fails.

Today’s move gives the U.S. wide authority to call the shots in the auto industry for the first time since the 1980s bailout of Chrysler Corp. and keeps GM and Chrysler alive long enough for a broader reorganization plan from the incoming Congress and President-elect Barack Obama.

“The restructuring they’re going to have to go through will be huge,” said Maryann Keller, an independent auto analyst and consultant in Greenwich, Connecticut. “This is money to tide them over. They’re going to come back for more money. That’s when the government is going to have to decide whether they’re viable businesses.”

The White House stepped in after a compromise plan backed by President George W. Bush and House Democrats failed to pass the Senate, thwarting Bush’s aim to avoid a “disorderly” bankruptcy that would have further weakened the U.S. economy.

Obama endorsed the plan, calling it a “necessary step” to “save this critical industry.”

March 31 Deadline

GM, the biggest U.S. automaker, and No. 3 Chrysler have until March 31 to meet the government terms or have the Treasury Department call the loans. Such a step would likely force the companies into bankruptcy, because they had said they were only weeks away from insolvency without an infusion of cash.

“Our focus now turns to rapidly and fully implementing our restructuring plan,” GM Chief Executive Officer Rick Wagoner said at a news conference in Detroit, the automaker’s hometown.

Ford Motor Co., the second-biggest U.S. automaker, has said it doesn’t need emergency aid.

GM and Auburn Hills, Michigan-based Chrysler must provide warrants for non-voting stock, limit executive pay, open up financial records, not issue dividends until the debt is repaid and give the government veto power over transactions larger than $100 million. They also have to agree not to use corporate jets.

Debt Terms, Czar

Government debt will become senior to other borrowing, to the extent allowed by law, and the automakers must cut their debt by two-thirds in an equity exchange.

Joel Kaplan, Bush’s deputy chief of staff, said the Treasury secretary would in effect be the so-called car czar, enforcing deadlines and holding authority to revoke the loans.

Bush also linked the assistance to changes in automakers’ union agreements, stipulating that half of the companies’ payments to a United Auto Workers retirement fund be made in equity.

A program that pays UAW members when they don’t work must be eliminated, and union labor costs and rules must be recrafted to be competitive with those of foreign automakers by Dec. 31.

The requirements could be modified by negotiations with the union and debtholders.

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Nothing so cheers the soul of a hardened businessman as the sight of a competitor on his knees. So you’d expect the spectacle this week of Detroit’s struggling Big Three carmakers begging Congress for $34 billion in loans and lines of credit would be cause to break out the sake in Japanese boardrooms.

After all, Japan’s own big three — Toyota, Honda and Nissan — have battled for decades to surpass once mighty GM, Ford and Chrysler. Now it would appear victory is at hand. Even if lawmakers bail out all three, the U.S. companies will require major restructuring that will leave them smaller and weaker, making it easier for their Asian rivals to gain market share both in the U.S. and globally. (See the 50 worst cars of all time.)

Yet Japan’s automakers are not celebrating. Far from it. They are suffering mightily from the same massive decline in auto sales that is killing Detroit. Moreover, the bankruptcy of one or more of the Big Three could create havoc among parts suppliers that sell to Japan’s carmakers; job losses would send more shock waves through the U.S. economy, deepening the recession in what is by far the largest single market for Japanese cars. “What we’re seeing is the 30-foot tsunami that not even Toyota can cope with,” says Tatsuo Yoshida, executive director and senior analyst at UBS Securities Japan.

While no Japanese automaker is on the brink of bankruptcy, Toyota’s executive vice president Mitsuo Kinoshita calls the sharp contraction of global sales “unprecedented.” Toyota, Honda and Nissan are slashing earnings estimates, firing workers and trimming production. In November, the Japanese auto industry saw its worst month in more than three decades, as domestic sales fell 27.3% compared with the same month last year. Sales of Japanese cars in the U.S. fell more than 30% last month.

Toyota, the industry behemoth, just recorded its seventh consecutive month of declining sales, and the company’s second-quarter net profit plunged nearly 70%. Toyota has cut its earnings forecast for the fiscal year ending March 2009 to $6 billion, which is just one-third the profit it made the previous year. “You are looking at the deepest downturn that Japanese automakers have ever seen,” says Chris Richter, senior research analyst at CLSA, a Hong Kong–based brokerage house. “They’ve faced downturns before, but not downturns in virtually every global market simultaneously. Even Honda Civics and Toyota Priuses aren’t selling well.”

This bleak outlook could get even worse, at least in the short term, if GM, Ford or Chrysler went bust. That’s because of a domino effect that would probably result in the subsequent failures of parts suppliers that also sell to factories operated by Toyota, Honda and Nissan in the U.S. Vehicles built on American soil accounted for 63% of Japan’s total U.S. sales in 2007, according to the Japan Automobile Manufacturers Association. A sudden parts shortage could force companies to shut down some of those assembly lines, generating major losses.

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Carlos Ghosn should focus on managing Renault SA and Nissan Motor Co. through the worst auto-market slump in years as merger talks between General Motors Corp. and Chrysler LLC hamper his quest for a U.S. partner, investors say.

Ghosn needs to concentrate on his companies now, because they’re both suffering,” said Koichi Ogawa, who helps manage $28 billion at Tokyo-based Daiwa SB Investments Ltd. Nissan and France’s Renault should tighten the screws at home rather than invest abroad as the credit crisis “pushes the global economy toward recession,” he said.

GM, considered a potential partner by Ghosn even after the biggest U.S. automaker rebuffed his last approach in 2006, has held talks over a possible government-funded combination with Chrysler, which had been increasing cooperation with Nissan. The Tokyo-based company and Renault, both led by the 54-year-old chief executive officer, aren’t likely to offer a better alternative.

Nissan slashed its full-year profit forecast by more than half on Oct. 31 after global auto markets plummeted. Renault had already cut its guidance, in part because Nissan won’t contribute as much to profit as the automakers expected. The pair’s struggles, reflected in industry-leading stock declines, may thwart Ghosn’s U.S. ambitions.

“Both Nissan and Renault are in a tough situation and they’re eating up cash,” said Koji Endo, a Tokyo-based analyst at Credit Suisse, which has a “neutral” rating on Nissan and recommends selling Renault stock. “It’s not wise to do anything with the Big Three while their fate is still unclear.”

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Chrysler LLC today announced its U.S. sales dropped 35% in October compared to a year ago.

The Auburn Hills automaker sold 94,530 cars and trucks in October, the company said.

The automaker attributed the decline to conditions of the overall industry and a reduction in fleet sales.

“While October was a very tough month for everyone in this business, we as an industry must focus on the fact that there are still many serious car buyers out there, and every company has an equal opportunity to win their business,” Jim Press, a Chrysler vice chairman and president, said in a statement.

In November, Chrysler said, it will be offering an aggressive sales incentive program, including cash rebates of up to $6,000.

Chrysler sales so far this year are down 26% compared to last year.

Chrysler plans to show at least one, and perhaps all three, of the electric vehicles it is developing at the Los Angeles auto show in a few weeks.

Chrysler has said it will have an electric vehicle on sale in 2010. The three candidates for production are the Dodge EV battery-powered sports car and extended-range electric versions of the Jeep Wrangler and Chrysler Town & Country.

Mini’s upcoming electric car will also make its first public appearance at the LA show. Mini plans to build 500 of the Mini E cars this year and lease a few of them to selected customers in California, New York and New Jersey. The electric Mini has only two seats because its lithium-ion batteries take up the space where the rear seat normally goes.

General Motors and Chrysler announced further economies yesterday as the biggest and smallest of Detroit’s three carmakers race to conserve liquidity amid a deepening slump in vehicle sales.

GM has been in talks on a takeover of its smaller rival, controlled by Cerberus Capital Management, the New York buy-out firm. But yesterday’s announcements were made separately.

Rick Wagoner, GM’s chief executive, and Fritz Henderson, president, said job cuts among salaried staff and contract workers were in the offing this year and in early 2009. “The global economic outlook remains very concerning,” they said in a letter. “As a result, actions are being taken throughout GM’s global operations to address our increasing need to conserve cash.”

GM aims to trim 15 per cent of its US salaried staff costs, or about 4,800 of its 32,000 white-collar workers. But the executives said: “We need to reduce our salaried and contract workforce by even more than we anticipated”. GM was also suspending matching contributions to salaried employees’ retirement savings plans.

GM has bled about $1bn in cash each month this year, and analysts expect the haemorrhaging to accelerate well into 2009, if not longer.

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Chrysler indicated early this morning that it had a net loss of $662 million in the second quarter of this year and also announced it will close its Newark, Del., Assembly Plant earlier than expected and eliminate a shift at its Toledo North Assembly Plant.

The shift reduction in Toledo will occur Dec. 31 and affect about 825 jobs. The Newark plant was already slated for closure at the end of 2009 but will now close Dec. 31, 2008, affecting 1,000 jobs.

Chrysler said in a statement that it is committed to working with the UAW “to address the represented manpower reductions in a socially responsible manner” and will hold meetings with employees to review special programs for the affected locations.

The bulk of the $662-million losses — $572 million — were attributed to the automotive business.

Combined with previous statements, today’s announcement indicates that Chrysler’s automotive and financing businesses lost $1.17 billion though the first half of the year. During the same time, Ford Motor Co. lost $8.6 billion while General Motors Corp. lost $18.7 billion.

The Auburn Hills automaker gave the guidance on its second-quarter numbers in response to public filings today by minority partner Daimler AG, which said it lost 351 million euros — or $528 million using an average third-quarter exchange rate of $1.505 — on its 19.9% stake of Chrysler.

Chrysler’s results show up in a three-month delay in Daimler’s quarterly report. Overall, Daimler said it had a net profit of 213 million euros — $321 million — during the third quarter.

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Japan’s Nissan Motor Co. isn’t willing to put up cash for an alliance with U.S. automaker Chrysler, Bloomberg News reported Thursday, citing two people with knowledge of the matter. Nissan, which has 453.8 billion yen ($4.6 billion) in cash, won’t consider a tie-up that would weaken its financial position, said one of them, the report added. Nissan and alliance partner Renault were proposing to acquire around 20% of Chrysler and such an offer was now before private equity firm Cerberus Capital Management, The Detroit News reported Wednesday.