General Motors continues to face financial woes in the midst of its corporate restructuring. The company announced over the weekend that it has borrowed an additional $4 billion from the U.S. Treasury in order to help accelerate its restructuring program, which was given a deadline of June 1st by the Obama administration.
GM also said that it has succeeded in reducing its workers' hourly compensation by a whopping 28-percent--starting with its Canadian workforce. GM officials said that despite the reduction in hourly wages, it would compensate by paying workers in company shares. Although this sounds great initially, GM's shares have dropped significantly. Just a year ago on May 26th, GM's stock was standing at roughly $18 and is today worth less than $3.00. In fact, on Friday, May 16th, GM's shares were at a mere $1.06.
Although GM is in agreement with the Canadian Auto Workers union to reduce compensation, the CAW group was reserved when talking about GM's future outlook.
"All of our discussions that we had, it's very likely that [GM] will go into Chapter 11," said Canadian Auto Works union president Ken Lewenza.
Officials at GM indicated that the additional $4 billion would not be the last of its loans. The company is expecting its total U.S. Treasury loans to escalate to $27 billion by June 1st, 2009. Currently, GM has borrowed a total of $19.4 billion.
Interestingly, GM is hoping that it would have a plan in place by June 1st to restructure and survive, but hopes that it could convince its lenders to write off roughly $24 billion of $27 billion--roughly 90-percent--of the money that it will borrow. GM officials said that the company would file for bankruptcy if it doesn't win the waiver.
GM and its top executives have been accused in the last two years of misguided direction. GM is looking at dumping failing brands, including Saturn, Pontiac and Hummer.