It would be part of a nationwide, new-generation satellite system.

By Rachel Pritchett

rpritchett@kitsapsun.com

BREMERTON

Planning is under way for a new, 75-foot-tall antenna at Bremerton National Airport designed to improve communications between aircraft and ground control.

The Federal Aviation Administration and ITT Corp. are building a nationwide “automatic dependent surveillance broadcast” satellite system for better communication. It consists of a web of towers that, starting around 2013, would provide a next-generation system of aircraft communication, explained airport director Fred Salisbury at a Port of Bremerton meeting Tuesday.

The FAA and ITT have asked the Port of Bremerton to locate a tower at the airport, in part because the airport is close to Seattle. Construction is expected this summer.

When the entire network is completed, low- and high-flying aircraft at airports like Bremerton National will have the ability to track each other better, and to better receive on-board information such as weather conditions.

The cost of building the antenna and of maintaining would be shouldered by the FAA.

It would be located near the north end of the airport runway.

Salisbury said other sites new antennas include oil rigs in the Gulf of Mexico, to improve communications in that vast expanse of space.

“I think this is a really good thing for the airport, and the area,” Salisbury said.

In other news:

Port Attorney Gorden Walgren’s suspicions were right that this was not the right session to ask the legislature for money. Bills did not pass that would have given the port big sales-tax exemptions for costs in the building of an incubator building for the wished-for SEED, or Sustainable Energy and Economic Development, project.

 Acting CEO Tim Thomson is negotiating with a business tenant on a lease for a new building constructed by the port that has stood empty for months. If successful, the tenant would take up half the medium-sized building.

The boat-occupancy rate at the port’s year-old Bremerton Marina currently is 29 percent. The goal is to bump that up to 50 percent this year, said Steve Slaton, the port’s director of marine facilities. Meanwhile, the Port Orchard Marina is 96 percent filled.

Commissioners said that public-documents requests are taking significant staff time to respond to, and asked that they be given regular information on who is making the requests and for what. Commissioner Larry Stokes said that it could get to the point that new staff will have to be hired to respond to the requests.

Port leaders have proceeded on plans to get some public-relations help to help with various causes. While commissioners had earlier agreed to hold off hiring PR services until a permanent chief executive officer was hired, it turned out that the effort nonetheless went forward.

Three finalists will be interviewed next week. One supposedly will be hired for 90 days, and it is not know now whether they would continue on.

Commissioner Bill Mahan said it’s a good bet the port will receive $3 million in stimulus funds for a new road crossing the South Kitsap Industrial Area and connecting potential commercial development areas. The port is positioning itself funds from an upcoming second round of stimulus funds, he said.

WASHINGTON (AP) — With just two days left before a government-imposed restructuring deadline, Chrysler LLC took a step away from the brink of bankruptcy Tuesday when its biggest lenders reached a deal with the Treasury Department to slash the teetering automaker’s debt.

Yet Chrysler’s fate remains far from assured. If the company’s smaller creditors don’t get on board, a bankruptcy filing remains a possibility.

But now that Chrysler has a tentative agreement with the United Auto Workers and is closing in on a pact with Italian automaker Fiat Group SpA, Chrysler has cleared nearly all the hurdles ahead of its Thursday deadline. That brings the automaker closer to securing another $6 billion in government aid, keeping it alive and preserving its remaining 54,000 jobs.

“I think this has moved the needle more toward a turnaround,” said Mike Boudreau, a director at O’Keefe & Associates, a Bloomfield Hills, Mich.-based turnaround firm. “They still could file for bankruptcy, but they also could go into it with some hope of reorganizing too.”

Under a deal reached Tuesday’s with four banks, Chrysler’s secured creditors would accept $2 billion cash to settle the automaker’s $6.9 billion debt, according to the people familiar with the talks. The people spoke on condition of anonymity because the agreement had not been formally announced.

The Treasury Department has been negotiating with a committee of the creditors, including the big banks Citigroup Inc., JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley. The group also includes several smaller banks and some hedge funds. Messages seeking comment were left for representatives of the banks.

Chrysler and the Treasury still need to persuade the rest of the automaker’s 46 secured creditors to go along with the new proposal. Bankruptcy experts have said it may be tough to get them to take a big haircut because their loans are secured by Chrysler’s physical assets, things like plants and brands that could provide a better payoff if the company is liquidated.

The banks that are on board hold 70 percent of Chrysler’s secured debt, said Brian Johnson, auto analyst for Barclay’s Capital, so a Chrysler liquidation now looks like the “least likely route.”

“We believe it is increasingly clear that Chrysler will be restructured and avoid liquidation,” Johnson wrote in a research report Tuesday.

Boudreau said that still might require filing for bankruptcy protection. As Chrysler’s complex reshaping comes together, there are still other issues to address, such as reducing the size of its dealer network and finding sources of financing for its customers.

Chrysler cleared a major hurdle over the weekend by reaching a new deal with the UAW that would give the union a 55 percent stake in the company. Chrysler will use equity instead of cash to fund at least 50 percent of its $10.6 billion obligation to a union-run health care trust, and the trust would get a seat on the board.

Factory-level union leaders voted unanimously Monday night to recommend that rank-and-file members approve the concessions. Final approval of the new arrangement could come as early as Wednesday.

“It’s important to get some wins under your belt,” Boudreau said. “One win can lead to another win. The UAW deal led to the bondholder agreement, which could lead to a deal with Fiat.”

A person familiar with the Chrysler-Fiat talks said Tuesday that the Fiat deal is near completion. Negotiators for both automakers and the government were waiting on the debt holders before finishing their talks, said the person, who spoke on condition of anonymity because the talks are ongoing.

Fiat spokesman Gualberto Ranieri declined to comment on the possibility of a deal being near. Italian media reported that the viability of the alliance would be announced Thursday.

“The situation with Chrysler will be decided Thursday evening Italian time, and up until that time we won’t have much to say,” Fiat Vice Chairman John Elkann said at the close of a meeting of Exor shareholders in Turin, according to the Italian news agencies Apcom and ANSA.

Last week, Fiat CEO Sergio Marchionne affirmed his company’s unwavering commitment” to its proposed alliance. He has been traveling back and forth to the United States to work on the deal.

Under the proposed alliance, Fiat is offering its fuel-efficient powertrain technology that would help Chrysler expand into the small car market. In return, it would get a 20 percent stake of the U.S. automaker to start.

A summary of the revised Chrysler-UAW contract says Fiat eventually will own 35 percent of the restructured company.

Chrysler has borrowed $4 billion from the government since the start of the year after the automaker said it wouldn’t be able to survive the steep decline in U.S. auto sales without government help.

In March, the government’s auto task force rejected Chrysler’s restructuring plan and determined that the Auburn Hills, Mich., automaker could not become viable without taking on a partner. The government told the company it must ink a deal with Fiat, gain concessions from its unions and get debt holders to cut the amount owed by the company by April 30.

If Chrysler is successful, the government has promised another $6 billion in loans to help survive until its cost-cutting can take effect and Fiat can bring its small vehicles to the U.S. Without a deal, the government said it would not even provide bankruptcy financing and Chrysler almost certainly would end up in liquidation.

NEW YORK (AP) — Investors set aside some of their worries about the economy Tuesday after a closely watched measure of consumer confidence soared in April.

Stocks fluctuated in a narrow range as concerns about the spread of swine flu and the viability of banks were eased when the Conference Board reported that its Consumer Confidence Index surged to its highest level since November.

IBM Corp.’s decision to boost its dividend and spend more to buy back stock also gave the market a shot of confidence.

In midafternoon trading, the Dow Jones industrial average rose 29.86, or 0.4 percent, to 8,054.86 after being down as much as 86 ahead of the report.

Broader stock indicators also rose but remained volatile. The Standard & Poor’s 500 index rose 2.30, or 0.3 percent, to 859.81, and the Nasdaq composite index rose 1.20, or 0.1 percent, to 1,680.61.

Todd Leone, managing director of equity trading at Cowen & Co., said investors have been growing more upbeat about prospects for the economy. That optimism followed a string of better-than-expected readings and has driven a market rally since early March.

“People aren’t as afraid as they have been. We’re definitely seeing more money come back into the market,” he said.

That optimism took a hit ahead of the confidence reading as investors worried that a growth in swine flu cases could hurt industries such as travel and tourism. The World Health Organization raised its alert to Phase 4 out of 6, saying the flu spreads easily but is not a pandemic.

Banking troubles came back into the spotlight after news came out that regulators told Bank of America Corp. and Citigroup Inc. that they may need to raise more capital unless they can convince regulators that results of government “stress tests” were mistaken.

Bank of America fell 60 cents, or 6.7 percent, to $8.32, while Citigroup fell 14 cents, or 4.6 percent, to $2.93.

But the report on consumer confidence bolstered hopes that consumers not unemployed or struggling with debt might begin to step up their spending.

Some stocks that depend on consumer spending rose after the Conference Board said its index jumped 12 points to 39.2 this month. The reading was far better than the 29.5 that economists had expected, and suggests consumers might be willing to spend more if confidence continues to build.

Starbucks Corp. rose 48 cents, or 3.6 percent, to $13.68, while Coca-Cola Co. advanced 14 cents to $42.38.

IBM rose $1.84, or 1.8 percent, to $101.79 after the company raised its quarterly dividend 5 cents to 55 cents. The company’s board authorized another $3 billion for repurchasing stock. The move brings the total available for buying up shares to $6.7 billion.

“IBM’s buyback and dividend hike has given the market some confidence and reminded people that there is a little bit of favorable news in technology,” said Nick Kalivas, vice president of financial research at the brokerage MF Global in Chicago.

Unlike other major benchmarks, the tech-heavy Nasdaq composite index is up 6.5 percent this year as investors look for lean technology companies to benefit quickly from an economic recovery.

Investors responded more to news about individual stocks rather than buying entire industries, as had been the case in recent months when traders placed bets on consumer staples and technology companies expected to better endure the recession.

In other corporate news, Office Depot Inc. jumped 43 cents, or 17 percent, to $2.96 after its first-quarter loss wasn’t as bad as Wall Street feared.

Fortune Brands Inc., a maker of consumer products including Jim Beam bourbon and Titleist golf balls, rose $1.92, or 5.3 percent, to $38.44 after predicting its first-quarter earnings will beat analyst expectations.

The swine flu gave investors reason to cash in recent gains Monday, but the Dow is still up 22.6 percent from the nearly 12-year low it reached in early March.

In other trading Tuesday, the Russell 2000 index of smaller companies rose 5.62, or 1.2 percent, to 475.15.

Bond prices fell, pushing the yield on the 10-year Treasury note up to 2.98 percent from 2.91 percent.

The dollar was mostly higher against other major currencies. Gold prices fell.

Light, sweet crude fell 37 cents to $49.77 a barrel on the New York Mercantile Exchange.

About four stocks rose for every three that fell on the New York Stock Exchange, where volume came to a light 761.6 million shares.

Overseas, Japan’s Nikkei stock average fell 2.7 percent. In Europe, Britain’s FTSE 100 fell 1.7 percent, Germany’s DAX index fell 1.9 percent and France’s CAC-40 fell 1.7 percent.

COLUMBUS, Ohio (AP) — Oil prices fell for a second straight day Tuesday on fears that the outbreak of swine flu would delay an economic recovery and further dampen energy demand.

Benchmark crude for June delivery fell 74 cents to $49.40 a barrel on the New York Mercantile Exchange. The contract Monday fell $1.41 to settle at $50.14.

Swine flu has killed more than 150 people in Mexico and number of countries reporting cases has spread to Europe, the Middle East and Asia. About 50 cases have been identified in the U.S., but no deaths.

Fears of pandemics have slowed the global economy in the past and officials with the World Health Organization, while raising alert levels Monday, warned against overreacting.

On Tuesday, countries, including Canada, Israel and France, warned against any nonessential travel to Mexico.

“Border controls do not work. Travel restrictions do not work,” WHO spokesman Gregory Hartl told reporters on Tuesday in Geneva, recalling the 2003 SARS epidemic that killed 774 people, mostly in Asia, and slowed the global economy. “There was much more economic disruption caused by these measures than there was public health benefit.”

A global economic downturn has already led to a severe tumble in crude prices. A barrel of oil cost about $100 less than a year ago.

The fear is that the outbreak could discourage people from traveling, lead to closed factories and further hurt the economy and oil consumption, said Addison Armstrong of Tradition Energy.

Prices bounced off lows of $48.55 Tuesday on news that consumer confidence is moving higher. But gains this year have been weighed down by the amount of unused oil in storage, which have reached 19-year highs.

That trend is expected to continue when the government reports crude in storage on Wednesday.

Analysts expect storage levels to grow by 1.8 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

They also are expecting a build of 900,000 barrels of gasoline.

Still, energy prices have been relatively stable given all of the data pointing to a horrible economy in which consumers and industries are spending a lot less on energy.

“There are weeks of evidence that oil consumption is down and will remain down and it hasn’t mattered,” said oil analyst and trader Stephen Schork.

Compared with 2008 drivers are still getting a big break at the pump.

Gasoline prices, which were soaring a year ago toward $4 a gallon, have settled into a range as well at a national average of about $2.05 a gallon over the past month.

The government’s Energy Information Administration said gasoline prices for all grades averaged $2.102 a gallon for the week ended Friday, a decline of 1 cent from the previous week.

Prices ranged from $2.049 a gallon for regular gas to $2.285 for premium.

And on Tuesday there was a sliver of optimism in a couple of mixed economic reports.

The New York-based Conference Board said its Consumer Confidence Index rose more than 12 points to 39.2, up from a revised 26.9 in March. The reading marks the highest level since November’s 44.7 and well surpassed economists’ expectations for 29.5.

The huge jump follows a small increase in March, following a freefall in February. Still, the index remains well below year-ago levels of 62.8.

“It’s still a poor outlook,” Armstrong said.

While home prices dropped sharply in February, it was the first time in more than two years that the decline did not set another record, suggesting the housing crisis may be bottoming.

The Standard & Poor’s/Case-Shiller index of home prices in 20 major cities dropped by 18.6 percent from February 2008, slightly better than the 19 percent in January. The 10-city index slid 18.8 percent, compared with 19.4 percent the month before.

Prices at the pump fell 0.2 cents overnight to $2.048, according to auto club AAA, Wright Express and Oil Price Information Service. The prices are 0.3 cents higher than a month, but a $1.555 lower than a year ago.

BP PLC, the second-largest European oil company, said Tuesday that it returned to profit in the first quarter, beating analysts’ forecasts by earning $2.56 billion.

In other Nymex trading, gasoline for May delivery fell 1.75 cents to $1.386 a gallon and heating oil lost less than a penny to fetch $1.32 a gallon. Natural gas for May delivery rose 4.7 cents, selling for $3.30 per 1,000 cubic feet.

In London, Brent prices fell 65 cents to $49.67 a barrel on the ICE Futures exchange.

NEW YORK (AP) — Hopeful signs that the worst may be over for the economy boosted Americans’ moods in April, sending a closely watched barometer of sentiment to the highest level since November.

The New York-based Conference Board said Tuesday that its Consumer Confidence Index rose more than 12 points to 39.2, up from a revised 26.9 in March. The reading marks the highest level since November’s 44.7 and well surpasses economists’ expectations for 29.5.

The consumer confidence survey showed a substantial improvement in consumers’ short-term outlook, including even their assessment of the job picture.

Some encouraging news in areas like retail sales and housing have helped fuel a recent stock rally. A housing index showed Tuesday that home prices dropped sharply in February, but for the first time in 25 months the decline was not a record — another sign the housing crisis could be bottoming. The Dow Jones industrial average rose 17.12 to 8,042.12 by midday as investors set aside worries about spread of swine flu and the viability of banks.

Improvements in the stock market have helped boost shoppers’ moods, said Gary Thayer, chief economist at Wachovia Securities, but major economic problems remain — and that means that confidence could bounce up and down for awhile, he said.

“We can’t say we have seen the bottom of the economy,” he said. “We still have some economic concerns that we have to work through.”

Economists closely monitor consumer sentiment because consumer spending accounts for more than two-thirds of economic activity.

The huge jump in confidence follows a small increase in March, following a freefall in February. Still, the index remains well below year-ago levels of 62.8.

The April gains were fueled by “a significant improvement in the short-term outlook,” Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement.

She added that the index measuring how shoppers feel now, which posted a moderate gain, offered “a sign that conditions have not deteriorated further and may even moderately improve in the second quarter.”

The Present Situation rose slightly to 23.7 from 21.9 last month. The Expectations Index, which measures how shoppers feel about the economy over the next six months, skyrocketed to 49.5 from 30.2 in March.

That sharp increase — which marked the largest jump since a 13-point gain in November 2005 when the economy was recovering from Hurricanes Katrina and Rita — suggests that people believe the economy is nearing a bottom, Franco said. Still, she noted that the index remains well below the level associated with strong economic growth.

“It looks like the worst is behind us, but clearly we are not out of the woods,” said Franco.

With companies continuing to lay off workers, a major fear is that people will cut back their spending even more, and that could plunge the economy further into a downward spiral. Economists expect the unemployment rate — now at 8.5 percent and the highest since late 1983 — will hit 10 percent by the end of the year and keep climbing next year before it starts coming down.

Meanwhile, investors are becoming more unsettled by the possibility of a major swine flu outbreak, which could stall economic recovery — particularly in regions that depend on travel and tourism. Adam York, an economist at Wachovia Securities, said such a development could dampen confidence levels for May, but it’s still early to tell.

The consumer confidence survey showed that those anticipating business conditions will worsen over the next six months declined to 25.3 percent from 37.8 percent, while those expecting conditions to improve increased to 15.6 percent from 9.6 percent in March.

The employment outlook was also considerably less pessimistic. The percentage of consumers anticipating fewer jobs in the months ahead declined to 33.6 percent from 41.6 percent, while those expecting more jobs increased to 13.9 percent from 7.3 percent.

Call me with information on local dealerships. Rachel Pritchett, (360) 475-3783

DETROIT (AP) — General Motors Corp. says it will force 1,000 to 1,200 underperforming dealerships to close their doors as the automaker tries to thin dealer ranks to make the remaining outlets stronger.

Dealers were told of the move in a video conference Tuesday.

In addition, the company expects to lose 500 Hummer and Saturn dealers when the brands close or are sold, and it expects 400 dealers to close voluntarily. Another 500 would be consolidated into other dealers.

A dealer who watched the conference told The Associated Press about the changes, and company spokeswoman Susan Garantakos confirmed the numbers.

The company announced Monday it plans to reduce dealerships by 42 percent from 2008 to 2010, cutting them from 6,246 to 3,605.

By Rachel Pritchett

rpritchett@kitsapsun.com

BREMERTON

A unique partnership between Armin Jahr Elementary, the city and volunteers has blossomed into a garden plot at the city’s new Blueberry Park, where students will learn about good food to put in their bodies.

And, boy, are the third- and fourth-graders in Scott and Suzanne Wisenburg’s classes, as well as those in Lorrie Wolle’s class, pumped at the prospect of getting out, down and dirty.

“We’re going to plant lettuce,” announced Brittany Green.

“It’s one of the biggest plots,” said Cyrah Bias of the school’s 24-by-17-foot space in the emerging community garden.

“First, I would like to say it’s an honor for Armin Jahr having their own garden,” young Geddy Knierim said of the plot that’s a straight shot from the back of the school through a trail that the kids are making nicer.

“They’re eager,” admitted Scott Wisenburg.

Leadership Kitsap, a nonprofit group that trains adults to become community volunteer leaders, is the instigator of the partnership that led to the public school garden. 

The city and its parks department have signed on, as have Master Gardeners from the Washington State University Extension Office, who will help keep the garden going over the summer.

The first-ever effort has been at almost no cost.

“That part really amazes me, how much you can do with a little cooperation,” said Marie Vila, a city employee who’s worked for many months on the project with Leadership Kitsap’s “Team Radicchio.”

Students now are preparing their garden, and a special public groundbreaking is slated for May 6.

After that, it’s all about the students experiencing the full circle of planting and growing food, putting healthy, vitamin-filled fresh produce into their bodies, and composting everything back into the soil.

They’ll find out about pollination, weeding, watering and much more.

And the circle will become complete as they start up again next year with a new crop of produce and a new crop of students. 

Team Radicchio has put together a set of lessons to go with the garden.

Like his students, Scott Wisenburg is thrilled about the cooperative effort, and that — finally — a school other than the affluent private ones is getting a garden classroom.

“It’s a great exposure and something our kids really need,” he said.

Armin Jahr students have a good start in connecting with the earth. Fourth-graders this year participated at a camp at IslandWood on Bainbridge Island, where they composted everything left on their plates after meals. 

And they also get fresh-produce snacks at school, thanks to a special program. 

They’ve even helped plant some wetlands at Blueberry Park.

Students spent Earth Day picking up litter on the trail leading to the garden. 

They want to make it nice, like those at IslandWood, Scott Wisenburg said.

So into their garden on this former blueberry farm go the kids from Armin Jahr.

“All those connections to help them have more enriching experiences and prepare them for life,” said Suzanne Wisenburg, whose students are next door to her husband’s.

Bloggers,

I had lunch today with local mobile DJ Bob Winters, who I have known, well let’s say 25 years. I asked him how business was and it’s great, he said, especially in this recession.

People don’t know what tomorrow will bring, and have turned to parties and drinking in a new live-for-today approach. He said the big bars are full, and he’s booked strong. 

So that’s at least one businesses that seems, so far, to be recession-proof.

Rachel Pritchett

Statistics show a severe first-quarter spike — nearly double — in reports from Kitsap’s mentally ill and from those weighing suicide.

By Rachel Pritchett

rpritchett@kitsapsun.com

EAST BREMERTON

It’s an early weekday morning. A phone lights up at the Crisis Clinic. 

It’s her again.

The woman sounds close to tears — really stressed. Like usual, she’s getting ready for work, but she’s worried herself into a petrified state. Maybe this will be her last day; maybe this is the day her job will go away. Then what?

For five minutes, she pours her fears into the phone. Someone from the Crisis Clinic calms her down. She hangs up and tentatively steps back into her morning routine.

People who are deeply anguished and frightened in this steamroller recession have contributed to a doubling of the number of calls received at the Crisis Clinic of the Peninsulas, its leader says.    

The center received a staggering 3,092 calls between January and March, compared to only 1,559 that time last year, according to program supervisor Kelly Schwab.

Calls like the woman who is worried about losing her job are common now, Schwab said. Schwab attributes the spike in calls to the recession bearing down on people who are poor and fragile to begin with.

Get an earful of these numbers between the same time period:

Calls from people who are already mentally ill — many of them bearing a heavier emotional burden because they fear they’ll lose government help — have risen from 652 to 1,256.

Calls from people who are lonely — some full of anxiety and staying in their cramped apartments watching the news that seems to get worse every day — have gone up from 489 to 604.

Calls from people contemplating suicide have increased from 163 to 306.

Calls from people saddled with heavy stress have jumped from 195 to 278.

Phone calls from persons desperate about their finances rose from 71 to 172. One man was in the midst of talking to a Crisis Clinic worker when a deputy arrived at his home with foreclosure papers.

“He was already unsure what he was going to do, so you can imagine,” Schwab said.

Calls about domestic violence are up from 67 to 172. “That is directly involved with the economy,” said Schwab of the increase in calls from both domestic-violence abusers and victims feeling helpless in a cold, gray economy.

“If you’re losing control in one part of your life, you exert it in another,” he said.

Schwab suspects, but can’t document, that calls from people who consider harming themselves — say through cutting — also is up.

Schwab said he’s never seen such a steep increase in calls from people feeling so powerless over something so overwhelming, calls so personal about something so impersonal.

The 35 Crisis Clinic volunteers do what they can.

“What we try to do is get them past a moment in time,” he said. They may suggest they get some exercise, or try to make them feel they have power. Or, just listen.

The community referral service Peninsula’s 2-1-1 also experienced double the calls the first quarter of 2009 over the same time of 2008, according to Kitsap Mental Health Services spokeswoman Rochelle Doan.

The most common inquiries were for utilities assistance, rent or mortgage assistance, low-cost housing, food and shelter.

More about the Crisis Clinic

Crisis Clinic of the Peninsulas, where distressed people can call for help, operates out of Kitsap Mental Health Services in East Bremerton. Founded in 1965, it is the nation’s third-oldest Crisis Clinic. Only San Francisco’s and Seattle’s are older. Two people who helped form the call center, Marge Thorne and Lucy Konizeski, continue to volunteer today. The Crisis Clinic serves people on the Kitsap and Olympic peninsulas.

DETROIT (AP) — General Motors Corp. could be majority owned by the federal government under a massive restructuring plan laid out Monday that will cut 21,000 U.S. factory jobs by next year and phase out the storied Pontiac brand.
The plan, which includes an offer to swap roughly $27 billion in bond debt for GM stock, would leave current shareholders holding just 1 percent of the century-old company, which is fighting for its life in the worst auto sales climate in 27 years.
GM is living on $15.4 billion in government loans and said Monday in a filing with the U.S. Securities and Exchange Commission that it envisions receiving an additional $11.6 billion. But if GM’s restructuring plan can’t satisfy the government by June 1, the struggling company could go into bankruptcy protection.
GM said that it will ask the government to take more than 50 percent of its common stock in exchange for canceling half the government loans to the company as of June 1. The swap would cancel about $10 billion in government debt.
In addition, GM is offering stock to the United Auto Workers for at least 50 percent of the $20 billion the company must pay into a union run trust that will take over retiree health care expenses starting next year.
If both are successful, the government and UAW health care trust would own 89 percent of GM stock, with the government holding more than a 50 percent stake, CEO Fritz Henderson said in a news conference at GM’s Detroit headquarters.
President Barack Obama’s administration said in a statement that the bond exchange filing is an important step in GM’s restructuring but the administration has not made a final decision about taking stock for part of its loans.
“The interim plan that GM laid out in this filing reflects the work GM has done since March 30 to chart a new path to financial viability. We will continue to work with GM’s management as it refines and finalizes this plan and with all of GM’s stakeholders to help GM restructure consistent with the president’s commitment to a strong, vibrant American auto industry,” the statement said.
Henderson said that although the government would own a majority of GM’s outstanding common shares, the Treasury “hasn’t demonstrated interest in running the company,” but would have someone on the board looking out for the taxpayers’ interest. The task force has directed current board chairman Kent Kresa to replace several board members.
“The shareholders, the VEBA (health care trust) and the government would want to have a someone on the board of directors,” he said.
Deals with the UAW and the Treasury have yet to be finalized, he said.
The struggling automaker said it will offer 225 shares of common stock for every $1,000 in notes held by bondholders as part of a debt-for-equity swap. Henderson said the objective is to reduce GM’s $27 billion of outstanding public debt by about $24 billion. The company estimates that after the exchange, bondholders would own 10 percent of the company.
That would leave current common stockholders with only 1 percent, GM said. Still, GM shares rose 34 cents, or 21 percent, to $2.03 in midday trading.
The plans, if successful, would reduce GM’s debt by $44 billion from the present figure of about $62.4 billion.
“We would be substantially less-leveraged as a company,” Henderson said.
Kip Penniman Jr., an analyst with KDP Investment Advisors Inc., predicted the exchange offer would fail and GM will file for bankruptcy. The value of all of GM’s outstanding stock is about $1.27 billion, so if bondholders get about 10 percent of the equity, the offer is only worth about 5 cents per dollar of GM bonds, he said.
GM’s plan depends on 90 percent of bondholders exchanging their debt, and “there is no chance that GM will get anywhere near that participation rate,” Penniman said in a research note.
Henderson said if the debt exchange isn’t successful, he would expect GM to file for bankruptcy protection somewhere around June 1, but such a filing would be unlikely very long before the deadline. Bondholders have until May 26 to accept the exchange offer.
Henderson said the company still prefers to restructure outside of court, but he acknowledged that the prospect of bankruptcy is more likely now that it was a few weeks ago.
“The task at hand in terms of what we need to get done is formidable,” Henderson said. “But it can be done.”
GM said it would speed up six additional factory closings that were announced in February, although it did not identify the locations. Additional salaried jobs cuts also are coming, beyond the 3,400 in the U.S. completed last week.
Henderson said there would be three more factory closures in 2010 beyond the six that were previously planned. He expects to identify them by publicly in May. They will include assembly, engine and transmission and parts-stamping factories, he said.
Including previously announced plant closures, the restructuring will leave GM with 34 factories at the end of next year, 13 fewer than the 47 it had at the end of 2008.
Besides the U.S. job cuts, General Motors Canada said it plans to slash its hourly work force to from 10,300 currently to 4,400 by 2014 years.
The company also said it plans to reduce its dealership ranks by 42 percent from 2008 to 2010, cutting them from 6,246 to 3,605. When asked how GM would accomplish that, Henderson would say only that the company would be making offers to the dealers in the coming weeks.
Mark LaNeve, vice president of North American sales and marketing, said a big chunk of the dealership reduction — about 450 — would come with the elimination or sale of Saturn, Hummer and Saab. GM would then look to end relationships with dealers that do only a small volume of business with GM, and then move on to other dealers, he said.
“We’ve got a cadence plan to it,” he said. “I don’t want to get rid of any dealers,” LaNeve said, but acknowledged that that GM has had more dealers than it needs for quite some time.
Henderson said the new plan lowers GM’s break-even point in North America to an annual U.S. sales volume of 10 million vehicles. That’s slightly more than the current sales rate, but most economists expect an uptick in the second half of the year.
“This lower break-even point better positions GM to generate positive cash flow and earn an adequate return on capital over the course of a normal business cycle, a requirement set forth by the U.S. Treasury,” GM said in a statement.
The company said it would phase out its storied Pontiac brand no later than next year, and the futures of Hummer, Saturn and Saab will be resolved by the end of this year by either selling them or phasing them out.
For Pontiac, the decision means the death of a brand known for its muscle cars including the Trans Am made famous in movies and the GTO, the subject of a nostalgic song by Ronny and the Daytonas.
Henderson said in a news conference that the company was spread too thin to make Pontiac work.
“We didn’t think we had the resources to get this done from a product perspective,” or marketing, he said.
He said the decision was very tough for many at GM because of the 83-year-old brand’s heritage.
Henderson said talks continue with potential parties to buy a stake in Opel and are expected to continue through the end of May. He said the company would continue to have a presence in Europe as a stakeholder. He said Chevrolet is one of the fast-growing car segments in Eastern Europe and Russia.
One of the conditions to get aid from Germany is to have a private investor take a stake in Opel, he said.
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AP Auto Writer Bree J. Fowler in New York, AP Business Writer Stephen Manning in Washington, D.C., and Associated Press Writer Charmaine Noronha in Toronto contributed to this report.