Bush announces auto rescue
Bush announces auto rescue
Government to loan GM and Chrysler $13.4 billion from Wall Street bailout fund so that the embattled auto firms don't run out of cash.
By Chris Isidore, CNNMoney.com senior writer
Last Updated: December 19, 2008: 9:30 AM ET
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.
Now, the real work begins. Make it happen.
I'm trying real hard to be optimistic about this, But considering the relationship between the UAW's Gettlefinger and the Major executives at General Motors, Ford and Chrysler, I'm hard pressed to believe that all these guys are gonna say Ok lets make up and play nice. Under the requirements there's a lot of changing of demands to be made. So far I haven't seen much in the way of mutual agreement on the issue of Debt, salary, retirees medical and work rules that makes me think a lot is going to change in the next 90 days. This is going to be real tricky to pulll off, and what about the sales situation? Cars are still stacked up here at the Conrail New Auto shipping parking lots so deep that you couldn't slide a worn nickel between doors. But they have till March to do something? But what?
After 8 yrs Bush has done the right thing .
As bizzare as this may sound ,Ford might end up the big winner over the next two years .
Lets hope he done it right. I read this this morn
By FRANK BASS and RITA BEAMISH - Associated Press Writers
Banks that have their hands out in Washington this year were handing out multimillion-dollar rewards to their executives last year.
The 116 banks that so far have received taxpayer dollars to boost them through the economic crisis gave their top tier of executives nearly $1.6 billion in salaries, bonuses and other benefits in 2007, an Associated Press analysis found.
That amount, spread among the 600 highest paid bank executives, would cover the bailout money given to 53 of the banks that have shared the $188 billion that Washington has doled out in rescue packages so far.
Some banks trimmed their executive compensation in the face of faltering performance that foreshadowed the current economic crisis, but they still granted multimillion-dollar packages. Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found.
Such bonuses amount to a bribe for executives "to get them to do the jobs for which they are well paid in the first place," said Rep. Barney Frank, the Massachusetts Democrat who chairs the House Financial Services committee.
"Most of us sign on to do jobs, and we do them best we can," said Frank. "We're told that some of the most highly paid people in executive positions are different. They need extra money to be motivated!"
So, with the banking bailout,the government has proven yet again that it is incapable of being responsible.
What eveidence is there that the current government (not the one that bailed out Chrysler decades ago) can do any good in the auto industry nationalization business?
Uh, Mr. Wagoner, why don't you and Mr. Nardelli just cut your compensation in half (as opposed to just Mr. Nardelli's salary being one dollar) until the corporation that treated you so well in the past gets back on it's feet?
I used to think this country was going to turn into another United Kingdom. We've gone past that and have become another Italy. Next stop, another Mexico.
They do have a reputation for acting and then thinking (sometimes they omit thinking all together).
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