CAR BREAKING NEWS - $17.4 billion bailout package approved for GM & Chrysler

Variant

Cast in the name of God, ye not guilty.
Jan 15, 2004
28,002
Virginia
CNN said:
NEW YORK (CNNMoney.com) -- President Bush announced a rescue plan for General Motors and Chrysler LLC Friday morning that will make $13.4 billion in federal loans available almost immediately.

A senior administration official briefing reporters said he expects that GM (GM, Fortune 500) and Chrysler LLC will be signing the loan papers to access the cash later Friday morning.

The money will come from the $700 billion fund set aside to bailout Wall Street firms and banks in October.

With these loans, Treasury will have committed virtually all of the $350 billion of that fund that it can hand out without additional authorization from Congress. Once Congress releases the other $350 billion, the two automakers will be able to borrow an additional $4 billion.

The loans are three-year loans but the money will have to be repaid immediately if the firms do not show themselves to be viable by March 31. It is expected that the companies will have to negotiate new agreements with unions and creditors in order to do so.

During brief remarks at the White House, President Bush said in normal times he would have not been in favor of preventing a bankruptcy of the two companies. But the current state of the economy and credit markets left him no choice but to act.

"Government has a responsibility to safeguard the broader health and stability of our economy," he said. "If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers."

"In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action," Bush added.
GM and Chrysler immediately issued statements thanking the administration for taking action.

"We know we have much work in front of us to accomplish our plan," GM said. "We thank the Administration for this important support of our industry at this challenging time, and we look forward to proving what American ingenuity can achieve."

The White House and Treasury Department signaled a week ago that they were willing to use cash from the bank bailout fund to help keep GM and Chrysler afloat after the Senate failed to vote for a $14 billion bailout for the two companies. The bill had already passed the House and had the support of the administration.

GM (GM, Fortune 500) has warned it will fall below the minimum amount of cash it needs to continue to operate without $4 billion in federal loans before the end of the month. Privately held Chrysler said it will need $4 billion or it will also run out of cash early next year.

Ford Motor (F, Fortune 500) has more cash on hand and has said it should be able to avoid tapping into federal dollars unless the weak auto sales continue longer than it expects in 2009.

U.S. auto sales plunged to 26-year lows last month as tight credit, rising job losses and weak consumer confidence have led to a virtual collapse in the auto market.

All of the major automakers, including Asian automakers Toyota Motor (TM) and Honda Motor (HMC), are cutting back production. But the situation is particularly severe at GM and Chrysler.

In the last week, those two automakers announced shutdowns of assembly lines for at least a month, several weeks longer than the typical shutdowns during the December holiday season

Hmm....not sure how I feel about that. I really hope that the gov't stands behind it's demand that the companies be financially viable by 3/31, but I honestly won't be surprised if that doesn't happen.

http://money.cnn.com/2008/12/19/news/companies/auto_crisis/index.htm?postversion=2008121909
 

TankRizzo

The People's Moderator
Super Moderator
Jun 1, 2001
257,696
back to the bailout, I fail to see what this is going to do or how it's going to help. This money is going to go directly into their cash burn and they won't fix any of the things that need to be addressed immediately because they are legally bound to most of the things that have put them in this situation.
 

|3illy the |<id

Active Member
Aug 1, 2008
34,526
back to the bailout, I fail to see what this is going to do or how it's going to help. This money is going to go directly into their cash burn and they won't fix any of the things that need to be addressed immediately because they are legally bound to most of the things that have put them in this situation.
I tend to agree. I think the only good thing in this mess is that they'll get some stake in the companies... so long as they use that to try to swing the companies to make better automobiles.
 
TS
TS
Variant

Variant

Cast in the name of God, ye not guilty.
Jan 15, 2004
28,002
Virginia
back to the bailout, I fail to see what this is going to do or how it's going to help. This money is going to go directly into their cash burn and they won't fix any of the things that need to be addressed immediately because they are legally bound to most of the things that have put them in this situation.

Yep. To me it sends them a message of "it's OK to run your companies shittily, we'll save you because you're too big/important to let fail. Don't worry about your unprofitability, we'll save you". :sad2:

I really hope the gov't takes a hard line when they're back on Capitol Hill next March talking about how they need more time, and more money, to turn things around.
 
TS
TS
Variant

Variant

Cast in the name of God, ye not guilty.
Jan 15, 2004
28,002
Virginia
akbar.jpg

Big mistakey?
 

Handerhan

Active Member
Sep 19, 2007
3,706
ATX: Home of the bodybag.
back to the bailout, I fail to see what this is going to do or how it's going to help. This money is going to go directly into their cash burn and they won't fix any of the things that need to be addressed immediately because they are legally bound to most of the things that have put them in this situation.
Well, you'd think those legally bound expenditures would've already been accounted and allocated well in advance from some other type of fund. Then again this is Detroit we're talking about. :dunno:
 

alkalinesolo

Active Member
Jul 2, 2007
11,462
I tend to agree. I think the only good thing in this mess is that they'll get some stake in the companies... so long as they use that to try to swing the companies to make better automobiles.


How is it a good thing that our government is now in the business of partially owning private companies?
 

|3illy the |<id

Active Member
Aug 1, 2008
34,526
How is it a good thing that our government is now in the business of partially owning private companies?
Well it's all crap. But a positive of it is that the government gets a stake. If we're going to loan them $17Bil we should get something back in return as well as some say in the direction that this companies are heading in.
 

whutaboutbob

I have a little new found respect for Ford backing out of this thing, and I am sincerely concerned about where our government appears to be taking us.

Just consider this for a minute:

They will have stakes in all of the largest financial institutions, banks, insurance companies, your mortgage company, and now your only manufacturing base left.

Meh, sounds to me like they have us coming and going.

Say you decide to be a third party candidate and challenge the two parties, and you win. Now your in office and trying to do what you said to get elected, when all of a sudden you get a notice that your house is getting taken away, your credit card is canceled, and your car just up and shut off.

Tinfoil I know, but hey man.. :noes:
 

disley

OT Supporter
Dec 31, 2007
25,399
Under the Southern Cross.
Wall st = 50 billion.
Detroit and the rest of Main st = 650 billion.
That's the right way around.
Giving money to Wall st won't get America back to work, and return it's industrial strength.
This will.
Start building new airports, shipping ports, railways, mass transit, schools, hospitals, clean energy power plants, ships, refineries, drill for oil, highways and bridges.
The list can be added to as economic benefits flow through.
So far the banks have started sharing the money given them, by paying bonus's and paying a return to investors on shored up, bad or over leveraged and over priced investments, which are detrimental to the economy.
Now they want more taxpayers money.
 

TriShield

Well-Known Member
Jul 6, 2001
115,888
Houston, TX
Between The Lines: President Bush’s Bailout Defense

By Robert Farago
December 20, 2008

President Bush’s radio address this morning: “Good morning. For years, America’s automakers have faced serious challenges — burdensome costs, a shrinking share of the market, and declining profits. In recent months, the global financial crisis has made these challenges even more severe. Now some U.S. auto executives say that their companies are nearing collapse — and that the only way they can buy time to restructure is with help from the Federal government.

I’m not going to name names. I’m not going to lay blame. I’m just trying to clear my name.

This is a difficult situation that involves fundamental questions about government’s proper role. On the one hand, government has a responsibility not to undermine the private enterprise system. On the other hand, government has a responsibility to safeguard the broader health and stability of our economy.

I’m sacrificing A for B.

Addressing the challenges in the auto industry requires us to balance these two responsibilities. If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy and liquidation for the automakers. Under ordinary economic circumstances, I would say this is the price that failed companies must pay — and I would not favor intervening to prevent automakers from going out of business.

I don’t favor intervening in free markets unless I do.

But these are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action. The question is how we can best give it a chance to succeed. Some argue the wisest path is to allow the auto companies to reorganize through Chapter 11 provisions of our bankruptcy laws — and provide a Federal loan to keep them operating while they try to restructure. But given the current state of the auto industry, my economic advisors believe that bankruptcy could now lead to its disorderly collapse — sending our economy into a deeper and longer recession.

A government-aided Chapter 11 is the right thing to do. But we’re not going to do it.

A more responsible option is to give auto companies an incentive to restructure outside of bankruptcy — and a brief window in which to do it. My Administration proposed legislation to achieve this, but Congress was unable to get a bill to my desk before adjourning for the year. This means the only way to stave off a collapse of the auto industry is for the executive branch to step in. So yesterday, I announced that the Federal government will grant loans to auto companies, which will provide help to them in two ways.

This is Barack Obama’s problem now.

First, the loans will give automakers three months to put in place plans to restructure into viable companies — which we believe they are capable of doing. Second, if restructuring cannot be accomplished outside of bankruptcy, the loans will provide time for companies to make the legal and financial preparations necessary for an orderly Chapter 11 process that offers a better prospect of long-term success.

We believe GM and Chrysler can do what they say they’re going to do– minus the bits they say they’re going to do. But I can’t say that. Because if I did, I would be saying I don’t believe them. Which would mean this bailout makes no sense whatsoever. Anyway, like I said, this is Barack Obama’s problem now.

The terms of the loans will require the auto companies to demonstrate how they would become viable. They must pay back all their loans to the government, and show that their firms can earn a profit and achieve a positive net worth. This restructuring will require meaningful concessions from all involved in the auto industry — management, labor unions, creditors, bondholders, dealers, and suppliers. If a company fails to come up with a viable plan by March 31st, it will be required to repay its Federal loans. Taken together, these conditions send a clear message to everyone involved in American automakers: The time to make the hard decisions to become viable is now — or the only option will be bankruptcy.

Chrysler and GM must pay back the federal loans because that’s what a loan is: something you pay back. Actually, fuck it. If they can’t repay the money, they can declare bankruptcy. At that point, no one’s going to care about a measly $17.4b.

The actions I’m taking represent a step that we all wish were not necessary. But given the situation, it is the most effective and responsible way to address this challenge facing our Nation. By giving the auto companies a chance to restructure, we will shield the American people from a harsh economic blow at a vulnerable time. And we will give American workers an opportunity to show the world once again that they can meet challenges with ingenuity and determination, and emerge stronger than before.

Who’s your Daddy?

Thank you for listening.”
 

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