What help for automakers means for workers, consumers

— -- The impacts of the loan program for U.S. automakers will be felt far from Detroit. As General Motors gm and Chrysler work to show they are restructuring to be "viable" long term, as required by the plan, it may mean changes for everyone involved with the car business — workers, creditors, shareholders, suppliers, dealers and customers.

What government involvement may mean to:

Workers

President Bush's plan includes targets for United Auto Workers' wages to be brought in line with what foreign companies pay their non-unionized workers in their U.S. plants and to have similar, more flexible work rules. Foreign makers can move workers from plant to plant and give them different duties or more responsibilities. Many union plants have thick manuals regulating what a worker can be asked to do.

UAW President Ron Gettelfinger is calling on the Obama administration to remove these "unfair conditions" when it takes office.

"While we appreciate that President Bush has taken the emergency action … we are disappointed that he has added unfair conditions singling out workers," Gettelfinger said.

Wages and benefits will be a key negotiating point in the restructuring. GM says it will have spent about $8 billion on labor this year.

What's next:Obama will face a difficult test with the unions, who worked hard for his election in key states such as Ohio. He said Friday that he wants to ensure "that it's not just workers taking the hits." He may have little choice but to force the unions to make more concessions.

"The irony is that Barack Obama and his team understand what needs to be done," says Don Grimes, a researcher at the University of Michigan's Institute of Labor and Industrial Relations. "But that's contradicted by what some of his supporters want him to do."

Creditors

Creditors were also specifically addressed in the loan plan and are being asked to cut the money owed to them by two-thirds in exchange for stock or some other form of equity.

Renegotiating debt is more typically done under bankruptcy-court supervision, and that's what creditors face if they don't restructure the debt now. The plan is clear that if the companies can't meet the goals for viability by March 31, the federal loans will be called, which would force the companies to head for bankruptcy court.

That deadline is actually a bonus for the automakers, says Aaron Bragman, an analyst at IHS Global Insight, that gives them clout to get banks and bondholders to agree to new terms outside of bankruptcy court. "It is an asset to have that kind of threat," he says. "It brings the parties to the table with a very defined goal."

What's next:The automakers have fought bankruptcy filings, saying sales would dry up. But Van Conway, managing director of restructuring firm Conway MacKenzie & Dunleavy, says Obama should not ease the bankruptcy deadline that could motivate creditors to act.

"You have the ultimate gun to everybody's head," he says. "It's a more efficient way to achieve the objectives that normally you can only achieve in bankruptcy court with a lot of fighting."

Shareholders

GM shareholders have already taken a beating this year, and although Chrysler is privately owned by equity firm Cerberus, pension funds that invest through Cerberus say they, too, have seen their investments decline. GM eliminated its dividend this summer, and shares are down 82% for 2008 through their close at $4.49 on Friday. The stock had dipped even lower, to $1.70 a share on Nov. 20.

Now, those weak shares may be diluted by the plan, which calls for the automakers to give the government warrants for non-voting stock in exchange for loans. The companies may also issue new shares for creditors and union benefit funds.

"We don't know the provisions of this," Conway says, noting the devil is in the details.

What's next:Shareholders will get a better idea of what this means to them when the Bush or Obama administration makes clear what type of warrants it is looking for as collateral for the loans.

Suppliers

The loan program sent a wave of relief through the hundreds of suppliers who make everything from headlights to tailpipes. With an automaker failure, the supplier base would have collapsed, says Neil De Koker, president of the Original Equipment Suppliers Association. The next couple months still will be hard, he says, because automakers have slashed production because of languishing sales.

Many small suppliers are living "payment to payment," says John Wilkerson, spokesman for TRW, which makes safety systems. And, "There are going to be plenty of challenges for folks like us on the larger side," even with "a little more cushion."

What's next:Suppliers want aid, too. The industry wants the government to guarantee the IOUs they have from automakers.

Dealers

The tough economy already was running hundreds of dealers out of business this year. More may now be saved, but their problems remain.

One issue is inability to qualify customers for credit. Chrysler said lack of consumer loans is dampening sales by up to 25% as it announced the shutdown of all its factories for much of January.

"Trying to run an auto business without credit is like running the airline industry without jet fuel," says CEO Mike Jackson of dealer chain AutoNation. "Showroom traffic is dwindling because banks have a new marketing campaign: 'Just say no.' "

Dealers also have suffered from doubts about the automakers' survival. "We have a lot of people who are just holding back because they don't know what the future of GM will be," says Dale Willey, who owns a GM dealership in Lawrence, Kan. "We've been sitting here for eight weeks with the threat of bankruptcy over our heads."

What's next:The next administration will be pressed to do more to loosen consumer credit. There are still too many dealers, but, "The market is going to take care of a lot of these issues," says Paul Melville, a dealer specialist for consultants Grant Thornton. Some will survive. Some won't.

Customers

"Car buyers can begin to reconsider buying an American car," says Philip Reed, senior consumer advice editor for Edmunds.com. Now GM and Chrysler need to reassure buyers that warranties and parts are secure, he says.

Also, "They have to get the negativity out of the media," says Ian Beavis of media buying firm Carat and a former marketing executive at Kia and Mitsubishi. "They can't go out there seeming desperate."

American automakers need to reconnect with consumers at the grass-roots level, he adds.

GM marketers are working on promotions "but aren't ready to discuss" them, says spokeswoman Kelly Cusinato.

Consumers should have been included in the bailout, says Rosemary Shahan of Consumers for Auto Reliability and Safety. "People want to buy cars. That's going to save the day."

What's next:Look for splashy ads from GM, Chrysler and Ford f letting customers know they're back and ready to do business.