Auto parts suppliers want $18.5 billion in guarantees for loans owed to them by GM and Chrysler. Auto dealers want $5 billion to $20 billion in loan guarantees so that they can finance their inventories. While Ford has said it doesn’t need federal help right now, it initially asked in December for $9 billion in loans and could re-submit the request.

Finally, the “Cash for Clunkers” tax credit, in which owners of inefficient vehicles more than 10 years old would receive a $10,000 tax credit for buying new efficient vehicles, is still floating around Congress is various guises after being stripped out of the stimulus package. The estimated cost to taxpayers is about $16 billion for the tax credit. Sen. Barbara Mikulski of Maryland has trumpeted a proposal to allow car buyers to deduct interest from their auto loans on their taxes, which was also taken out of the stimulus bill in favor of a deduction for sales taxes on new car purchases. The auto industry has heavily backed these bills, believing that they would stimulate demand for new cars.

GM and Chrysler have made dire predictions for what might happen if they go into bankruptcy. They said that if they were unable to find loans or the government did not lend to them, the move could cost the federal government hundreds of billions of dollars in lost tax revenue. CNN’s xperts agree with this analysis, and say that a bankruptcy of the magnitude of GM’s has not ever occurred before.

The “sadly shrunken companies” are hard to predict for the short term, but the long term CNN’s auto editor finds easier: Chrysler will be “a bit player in the American market and remain a negligible one overseas.” The editor continues:

“As for General Motors, I fear a worse fate – that of a shrunken giant, an aging athlete with its best years behind it playing out the string.

Human nature tells you how difficult it is for anyone to accept a lesser role in life, no matter the circumstances. GM has already lost its title of world’s largest automaker to Toyota. Now it risks slipping behind more dynamic competitors like Volkswagen and Hyundai.

Once it is no longer one of the biggest, GM will no longer have a claim at being the best. The brightest talent will look elsewhere for jobs; suppliers will take their new ideas to companies that are growing, not shrinking; top dealers will accelerate their divestment of GM franchises.

As it becomes smaller, GM will lose the advantages of scale. The car business is a volume business; your cost per unit goes down as your volume goes up. Plants run more efficiently, investments can be spread over a larger cost base and parts cost less. Toyota is a master of using volume to its advantage, which explains its standing in the industry.

GM will also no longer be able to afford the investments in new technology that will be essential to the automotive future. With its vast resources, the automaker used to be able to afford to dabble in a number of alternative fuel strategies – battery, ethanol, hybrid, fuel cell. It wasn’t a leader but it could keep pace by spreading its bets over the whole field.

But a smaller GM will have to make choices and focus its resources – something it isn’t used to doing. The cost will be higher and the chances of failure greater.

It was good to be the king and it is going to be very difficult to adjust to becoming just another prince. One of the sources of GM’s difficulties even before the current crisis was its inability to scale its overhead and its aspirations to its reduced circumstances.

Now, assuming that GM makes it through to 2012 when it says it will be profitable again with government help, it will have to find a whole new way of looking at the world.

That may be the hardest job of all.”

Levin argues that the auto companies helped create the middle class and is part of the “fabric of our nation.” Levin blames the government for not providing national health care or investing in “advanced technologies” as he says other countries did. Those other countries, he also points out, have also bailed out their auto industries.

USA Today believes that President George W. Bush, in giving GM and Chrysler a lifeline for a few months and a few billon dollars, was handing his successor Barack Obama an even tougher job: deciding whether to continue what has now become the status quo of financial aid for automakers or cut the strings loose. USA Today writes, “To no one’s surprise, the automakers are back for more.”

Should the government prevent bankruptcy or rely on bankruptcy as an effective way for GM and Chrysler to restructure? Should only the weakest be allowed to fail? Are GM and Chrysler’s plans for viability “realistic and sufficient”? “President Obama’s auto task force should review the plans with an eye toward protecting taxpayers and the broader economy, not hte various stakeholders in an industry that for too long has operated too many product lines and made too many mediocre cars.” At the same time, after “years of trimming, the industry is too small to pay the legacy costs of its former, much larger, self.”

The $20 billion GM in particular has committed to providing to an employee healthcare trust is worth 15 times the current market value of the company itself ($1.3 billion). The opinion editors conclude, “The fact is, autoworkers have long had some of the most generous health benefits available to American workers, with minimal co-payments and deductibles. Retirees might have to settle for Medicare when they’re eligible, plus some sort of employer-provided Medigap policy.”

USA Today concludes that these two separate questions need to be answered one at a time.

Last-minute concessions negotiations between the UAW and both GM and Chrysler were said to continue all through last night.

President Obama backed away from a prior promise to appoint a car czar to oversee GM and Chrysler, instead deciding to name a Presidential Auto Task Force under the leadership of Treasury Secretary Timothy Geithner and Ron Bloom, a former adviser to the United Steelworkers that told the steel workers’ union to accept major concessions as part of bankruptcy filings. Will Bloom do the same with the UAW and GM? Those who’ve previously worked with Bloom think so.

“The management of the Big Three are probably not going to like what Ron Bloom has to say; the UAW is not going to like what Ron Bloom has to say; and certainly the stockholders and creditors will not like what he has to say,” said Michael Psaros, a co-founder of private-equity group KPS Capital Partners, who has worked with Mr. Bloom in and out of bankruptcy courts. He adds that Mr. Bloom has “repeatedly shown an ability to transform struggling companies into profitable going concerns.”

GM and Chrysler’s plans for viability are to be submitted to the Treasury Department by 5pm today, Tuesday and are required to include concessions from the UAW on labor and healthcare costs. In addition, GM’s bondholders are required to make similar concessions on debt and according to insiders in on the negotiations, the bondholders presented a plan to the GM board on Monday.

What else will the reports include? What else can GM cut?

GM could announce plans to axe one or more brands, including Hummer, Saab, Saturn, or even its old mainstay, Pontiac. GM has previously said that all these brands are on the table. It has also said in previous filings with the government before a bailout was granted that it could decrease American plants from 47 to 38 within four years. The Wall Street Journal reported Saturday that GM will outline a bankruptcy contingency plan in its report, although it has previously said that bankruptcy is untenable. An insider reports that GM will argue that the government would spend more on the company in a bankruptcy situation than it would to keep GM from bankruptcy.

Chrysler could announce a renegotiation of its secured debt (it’s not saddled with the massive amounts of unsecured debt that GM is), plant closings, or international partnerships with Nissan or Fiat, which recently took large shares of the company in exchange for partnership plans for small cars.

The panel will consist of current administration officials such as Secretary of the Treasury Timothy Geithner and economic adviser Lawrence Summers, along with input from other officials across a spectrum of federal agencies. Obama’s administration will balance the desires of the auto industry for more billions in government bailout funds vs. a possible bankruptcy for the automakers and what that could mean for the economy. The Presidential Task Force will also include a seat at the table for Big Labor, with special assistant to the president of United Steelworkers, Ron Bloom, expected to be appointed to the task force. Bloom is considered to be an expert on retiree healthcare funds.

GM and Chrysler, meanwhile, are finishing up their plans for viability, after which they’ll negotiate with the government until a March 31 final deadline for reports. GM has already stopped and restarted concessions talks with UAW once over this weekend; the concessions from unions (and also from debtors) are required strings attached to further bailout money.

Without further money, GM and Chrysler will most likely go into bankruptcy. On the Sunday morning news shows, Obama’s top aide David Axelrod did not divulge whether Obama would allow GM to go into bankruptcy or what effect that could have on the economy. GM and Chrysler execs have said that consumers would not buy autos from a carmaker in bankruptcy.

UPDATE: Despite earlier intimations, the White House has announced that the panel will not be announced today. Press secretary Robert Gibbs declined to confirm whether Obama had considered any candidates for car czar before deciding to appoint a task force instead.

Forbes takes a dim view of this development:

“It amounts to a second, government-dominated board of directors for the two companies. Are two boards better than a single, empowered manager who could oversee the restructuring? With a committee in charge, no one person can take the credit–or the blame–for the still undetermined fates of Chrysler and GM. Committees are also notoriously sluggish and unwieldy.”

As a condition of the bailout funds, if the federal government cannot come to terms with GM and Chrysler’s other creditors about heading to the front of the pack, the government can send the companies into bankruptcy as a condition for further loans and go to the front through converting the bailout funds to “debtor in possession” (DIP) loans to the car companies, which are dealt with first in bankruptcy proceedings.

The automakers have rejected any calls for bankruptcy, saying the process would lead to liquidation after scaring off further creditors. Both are attempting to pare down debt in anticipation of a February 17th deadline for presenting plans on how they can repay the government loans.

GM is renegotiating $27.5 billion in debt in an attempt to get it down to $9.2 billion in exchange for equity to debtors. Chrysler owes $7 billion to Goldman Sachs, JPMorganChase and Citigroup and another $2 billion to Cerberus Capital Management and Daimler, which own 80% and 20% of Chrysler’s shares respectively. GM is on the hook to JPMorgan and Citigroup for $6 billion in loans.

Lawmakers discussing the bailout had pointed out that taxpayer money should not be lost if the companies failed.

Fears are therefore growing that General Motors’ and Chrysler’s viability plans will include plant closures or massive job cuts and layoffs. Chrysler temporarily shut three plants in Michigan and Canada last week. Both companies are required to gain concessions from bondholders and unions like the UAW (making workers’ salaries competitive with those of foreign automakers); a GM insider reports to Newsweek that GM’s plan includes further plant closures, salary wage cuts and layoffs.

The federal government requires evidence from Chrysler and GM that they can repay the federal bailout loans from December, despite the worst atmosphere for new car sales in 26 years. GM received a $9.4 billion and hopes for $4 million in additional loans, while Chrysler is on the hook to the Treasury for $4 billion and wants another $3 billion.

Newsweek explains:

“The companies are required to show the government they can achieve ‘positive net present value,’ which means that the present value of a company’s expected net cash flows exceeds the initial investment in the company.”

What Could Happen?
That means that GM and Chrysler workers with “white-collar” jobs may not get buyouts or be able to take early retirement as was offered in the past. Wage cuts could reach 5%. As far as plants with fates on the line, GM has closed four SUV and pickup truck-producing plants in the past year, without closing the corresponding part-supplying plants that produced engines and transmissions for the closed plants.

GM has been running some plants unprofitably, for only one shift, with a slow-moving assembly line. Some of the at-risk plants include the truck plant in Pontiac, Michigan that produces the GMC Sierra and Chevy Silverado. Observers point out that other factories have excess truck capacity and could pick up the slack for a closed Pontiac plant. The Orion Township, Michigan plant produces the Chevy Malibu and Pontiac G6 and could also face an axing. GM could move production of those vehicles to its Kansas City, Kansas plant.

GM’s Vice-Chairman, Bob Lutz, said that GM would have to shrink in size domestically in order to meet government viability requirements. At the same time, it’s on track for growth in other countries, including China. “We may have to take a step back in General Motors to find the right-sizing that’s going to permit a profitable existence in a much smaller market.”

Last year, GM closed plants in:
Moraine, Ohio
Janesville, Wisconsin
Oshawa, Ontario
Toluca, Mexico

Since the closing of those plants, US auto sales have collapsed from over 16 million to about 13 million. In 2009, industrywide sales could drop to a number closer to 10 million. At the same time, GM is looking to possibly gain some more factories as it talks to Delphi, one of its top auto parts suppliers, about taking back certain factories that provide it key auto parts as Delphi experiences financial problems of its own. An insider outlines that the talks have been ongoing for many weeks and may not end with GM-owned Delphi plants.

Not just GM, but Chrysler, too, might have to close plants due to its lagging auto sales.

What about the bondholders and UAW? UAW is waiting to see what other unions agree to in the way of concessions, and GM is holding a summit with its bondholders this week to come to an agreement on switching debt for equity.

Government Decides.
At least some details of the automakers’ plans are expected to be announced February 17th. However, the plans don’t have to be put into place until a government-set March 31st deadline.

If the two companies can’t compete by that date, the government will recall its billions in loans. The not-yet-appointed “car czar” will decide whether the companies meet government standards for viability; some members of Congress have discussed extending the deadline for the carmakers.

Some cities achieve a large part of their tax base from the money generated in sales taxes from each new car purchase; the cities would face a crunch without the sales tax revenue, so they’re loaning the dealerships money in their own version of the federal bailout. For example, Victorville, California extended a $200,000 loan to a local Chrysler auto plaza that generates half the town’s sales taxes (the town doesn’t have a property tax).

In the NPR comment section, Chartreuse Jones of Portland, Oregon notes: “I guess I missed the part of the story where giving the dealerships money somehow means that people will miraculously start buying cars again (and therefore generating sales tax income).”

Victorville City Councilman Terry Caldwell : “How do you say no the next company? If you help one, from a competition standpoint, do you have an obligation to help others?”

City Councilwoman JoAnn Almond: “I voted against it for one reason. There’s so many car dealers and businesses having a hard time right now and I don’t feel it’s fair to give a loan or bailout, so to speak, to one and not to others.”

The owner of the GMC/Pontiac dealership in Victorville said that he had not considered asking the local government for money, and he didn’t like to be in debt.

Councilman Mike Rothschild said he’s against the bailouts on a national level, but he feels that the local city should make an exception in this case.