Analysts: Chrysler, GM must take drastic action

DETROIT — When Chrysler was near death and awaiting a government bailout in 1979, then-CEO Lee Iacocca ordered drastic spending cuts and required that all expenses of more than $1,000 be approved by a senior vice president.

Chrysler LLC and General Motors Corp. must follow the same playbook now as they try to outlast the debate in Washington over whether they will get billions in government loans, industry analysts and management professors say.

Both automakers are perilously close to having only the minimum amount of cash needed to operate.

With GM alone spending $6.9 billion more than it took in last quarter and having operations in 34 countries, Iacocca's $1,000 limit might not be practical. But industry analysts and bankruptcy experts say both companies must take similar measures to ensure that their companies live long enough to use any loans they get.

"You turn the electricity off. You do things like shut the proving grounds down," said Jim Hall, managing director of 2953 Analytics of Birmingham, Mich.

Top executives of GM, Chrysler and Ford Motor Co. went to Washington this week seeking roughly $25 billion. They must now submit a plan to Congress by Dec. 2, followed by more hearings before any vote is taken. That means money won't be available at least until late December, probably not until early next year.

Meanwhile, the companies face huge expenses and a lack of revenue. October was the worst U.S. auto sales month in 25 years, and November looks only slightly better.

Chrysler CEO Bob Nardelli told the Senate Banking Committee his company had $6.1 billion in cash at the end of the third quarter after burning up $1 billion in cash each month from July through September.

GM fared worse. It burned up $6.9 billion last quarter and has warned that it could reach its minimums sometime next month.